Friday, June 18, 2021
Home Search

UK Budget - search results

If you're not happy with the results, please do another search

Is EVERY Market Rigged?

European Union Launches Investigation Into Manipulation of Oil Prices Since 2002 CNN reports: The European Commission raided the offices of Shell, BP and Norway’s Statoil this...

Taxpayers money funds Netanyahu home

A report has revealed that USD 88,000 worth of Israeli taxpayersâ„¢ money was spent in 2012 alone for the upkeep of Israeli Prime Minister...

Recurring Nightmares? Wake Up and Take Action

http://www.truthdig.com/report/item/recurring_nightmares_wake_up_and_take_action_20130517/ Posted on May 17, 2013 ...

Encircling Russia with US Military Bases: Moscow Catches CIA Spy Red-Handed

CIA agents operate most everywhere. Some pose as diplomats. Diplomacy provides cover for why they’re sent. Christopher Fogle was caught red-handed. He was assigned to...

Recurring “Economic Nightmares”? Wake Up and Take Action

The weekly news is like a recurring bad dream that is becoming an even worse nightmare. While the investor class cheers a rising stock...

Why Obama’s ‘Red Line’ in Syria has turned Pink

Back in August 2012, things were a lot different in Washington DC and in the White House. The Obama administration was brandishing a confident swagger...

Social Justice and the Economic Crisis: The Austerity Agenda Targets the Disabled

The recent Ontario provincial budget did not do very much to uphold Kathleen Wynne‘s claim to the title of ‘Social Justice Premier.’ Most of...

Why Obama's 'red line' in Syria has turned pink

<!--Patrick Henningsen-->Patrick Henningsen is a writer, investigative journalist, and filmmaker and founder of the news website 21stCentury Wire.com. ...

Both the Mainstream Media and the Gatekeeper “Alternative” Media Are Pro-War

Why There Is So Much Pro-War Reporting There are five reasons that the mainstream media and the largest alternative media websites are both pro-war. 1. Self-Censorship...

‘Israel PM spent $127k on rest chamber’

Israeli media say Prime Minister Benjamin Netanyahu spent $127,000 for a controversial sleeping cabin installed on a plane to carry the premier of the...

Top tips for saving money online

A stumbling economy, with savings, income and salaries, people are struggling hard to overcome the inflation rate. Due to the condition of the Economy...

Is Japan Developing a Nuclear Weapons Program?

The Wall Street Journal published an article on May 1 entitled “Japan’s nuclear plan unsettles US.” It indicated concerns in Washington that the opening...

US preexisting conditions health plan closed for enrollment

  By Kate Randall7 May 2013 With the Obama administration’s halting of enrollment in the Pre-Existing Condition Insurance Plan (PCIP), thousands of people are in danger...

How the Pentagon’s Military Industrial Complex Corrupted Afghanistan

America’s post-9/11 conflicts have been wars of corruption, a point surprisingly seldom made in the mainstream media. Keep in mind that George W. Bush’s administration was a monster of privatization.

Energy Nominee Ernest Moniz Criticized for Backing Fracking and Nuclear Power; Ties to BP,...

Think the world needs an alternative to corporate media? Click here to make a tax-deductible donation to Truthout and keep independent journalism strong.

President Obama’s pick to become the nation’s next secretary of energy is drawing criticism for his deep ties to the fossil fuel, fracking and nuclear industries. MIT nuclear physicist Ernest Moniz has served on advisory boards for oil giant BP and General Electric, and was a trustee of the King Abdullah Petroleum Studies and Research Center, a Saudi Aramco-backed nonprofit organization. In 2011, Moniz was the chief author of an influential study for MIT on the future of natural gas. According to a new report by the Public Accountability Initiative, Moniz failed to disclose that he had taken a lucrative position at a pro-drilling firm called ICF International just days before a key natural gas "fracking" study was released. Reaction to his nomination has split the environmental community. Advocacy groups such as Public Citizen and Food & Water Watch are campaigning against Moniz’s nomination, but the Natural Resources Defense Council has praised his work on advancing clean energy based on efficiency and renewable power. We speak to Kevin Connor of the Public Accountability Initiative and ProPublica reporter Justin Elliott, who have both authored investigations into Moniz’s ties to industry.

TRANSCRIPT:

AMY GOODMAN: President Obama’s pick to become the nation’s next energy secretary is drawing criticism for his deep ties to the fossil fuel, fracking and nuclear industry. Obama nominated MIT Professor Ernest Moniz last month to replace outgoing Energy Secretary Steven Chu.

PRESIDENT BARACK OBAMA: I could not be more grateful to Steve for the incredible contribution that he’s made to this country. And now that he’s decided to leave Washington for sunny California, I’m proud to nominate another brilliant scientist to take his place, Mr. Ernie Moniz. So, there’s Ernie right there.

Now, the good news is that Ernie already knows his way around the Department of Energy. He is a physicist by training, but he also served as undersecretary of energy under President Clinton. Since then, he has directed MIT’s Energy Initiative, which brings together prominent thinkers and energy companies to develop the technologies that can lead us to more energy independence and also to new jobs. Most importantly, Ernie knows that we can produce more energy and grow our economy while still taking care of our air, our water and our climate.

AMY GOODMAN: The Senate Energy and Natural Resources Committee is scheduled to hold a hearing on Ernest Moniz’s nomination as energy secretary on April 9th. Reactions to his nomination has split the environmental community. Advocacy groups such as Public Citizen and Food & Water Watch are campaigning against his nomination, but the Natural Resources Defense Council has praised his work on advancing clean energy based on efficiency and renewable power.

Much of the criticism of Moniz centers on his extensive ties to industry. He has served on advisory boards for oil giant BP and General Electric and was a trustee of the King Abdullah Petroleum Studies and Research Center, a Saudi Aramco-backed nonprofit organization. In 2011, Moniz was the chief author of an influential study for MIT on the future of natural gas. According to a new report by the Public Accountability Initiative, Moniz failed to disclose that he had taken a lucrative position at a pro-drilling firm called ICF International just days before the study was released.

We’re joined now by two guests. In New York, Justin Elliott, a reporter at ProPublica, he recently wrote a piece called "Drilling Deeper: The Wealth of Business Connections for Obama’s Energy Pick." And in Los Angeles, we’re joined by Kevin Connor, director of the Public Accountability Initiative, a nonprofit watchdog group which recently published a report called "Industry Partner or Industry Puppet? How MIT’s Influential Study of Fracking Was Authored, Funded, and Released by Oil and Gas Industry Insiders." We invited MIT to join us on the show or send a comment to read on air, but we did not receive a response.

Kevin Connor, Justin Elliott, we welcome you to Democracy Now! Justin, let’s begin with you. Talk about Ernest Moniz’ record.

JUSTIN ELLIOTT: Right, well, I mean, and to some extent, this is kind of the classic revolving door situation. As President Obama mentioned when he nominated him to be energy secretary earlier this month, Moniz was an undersecretary in the department in President Clinton’s second term. After, he went back to MIT, but he also took a number of positions on boards of large energy companies or advisory councils, as you mentioned, that includes BP. It included a uranium enrichment company called USEC.

And I think there’s sort of two reasons why this is important. One is, some of these companies do business with the Energy Department and seek contracts and loan guarantees from the department. The other is, people in the environmental community think that this may inform how Ernest Moniz sets research priorities, so people are concerned that he’s—that he’s going to call for research on fossil fuels to the detriment of research on renewables, for example.

AMY GOODMAN: BP. Talk about his relationship with BP.

JUSTIN ELLIOTT: Well, there’s kind of two prongs on that front. One is, personally, Moniz did a six-year stint—paid, although BP won’t tell me how much—on BP’s science advisory council. It’s not really clear what he did. They don’t—BP doesn’t have to reveal much about it in their public SEC filings. At the same time, BP is one of the main funders of the MIT Energy Initiative. I think they have given—given or pledged a total of $50 million over the past few years. So he’s clearly—he’s clearly close to that company.

AMY GOODMAN: And how typical is this for a university professor?

JUSTIN ELLIOTT: Well, I think, in the science—in sciences and, in particular, in sort of the energy secretary, it’s increasingly—it’s increasingly common. I mean, Steven Chu, the outgoing energy secretary, who’s also an academic, actually also had close ties to BP. BP had given a bunch of money to Steven Chu’s lab at the University of California, Berkeley, and Chu picked a BP executive to be one of his undersecretaries. And Chu was later involved in the government’s response to the Gulf oil spill. So, I mean, I think this is—this is certainly common if you’re going to be picking an academic who’s involved in energy, and particularly fossil fuel research.

AMY GOODMAN: I wanted to turn to comments of the executive director the Natural Resources Defense Council, or NRDC. Earlier this month, Peter Lehner posted on the NRDC blog a "To-Do List for the New Energy Secretary." In it, he wrote, quote, "As a scientist, Moniz is obviously a firm believer in the power of clean energy technology. [MIT’s Energy Initiative] projects under his tenure included windows that generate electricity, batteries built by viruses, and a biofuel made from yeast. But he also believes that technology must be complemented by policy in order to effect real change. As he said at the Aspen Ideas Festival in 2006, in order to address global warming, we must 'have the will to take more than baby steps.'" NRDC is supporting Moniz’s nomination.

JUSTIN ELLIOTT: Right, Amy, and it’s completely true. Moniz has spoken in favor of renewable energy. I mean, I think the best way to sort of interpret his nomination is that he fits in with what Obama has called his "all-of-the-above" energy policy, which is to embrace things like fracking, continued use of oil, nuclear energy, but also develop wind and solar. And I think that that’s where Ernest Moniz is on energy policy.

AMY GOODMAN: Let’s turn to our guest in Los Angeles, Kevin Connor, and what you found in your report. Talk about the report that you did that looks at—well, the title of the report is "Industry Partner or Industry Puppet? How MIT’s Influential Study of Fracking Was Authored, Funded, and Released by Oil and Gas Industry Insiders."

KEVIN CONNOR: Sure. Moniz’s nomination prompted us at the Public Accountability Initiative to take a closer look at an influential study that MIT did on "The Future of Natural Gas," as it was called, in 2011. It was issued by the Energy Initiative, which Moniz was the director of. And it gave a very pro-gas—put a very pro-gas spin on fracking and shale gas extraction, said that natural gas was a bridge or will be a bridge to a low-carbon future, said that the environmental impacts related to fracking are challenging but manageable, and also endorsed natural gas exports, which is a very industry-friendly position to take.

It immediately, you know, prompted some criticism from people who pointed to the fact that the report was actually industry-funded, much like the initiative itself. But it was extremely influential. It was designed to influence policymakers. Moniz testified before Congress on the report. It had immediate impact, as well. And it came at a critical time for the industry, which was facing significant questions about the safety of fracking, the relative environmental impacts of fracking. And we took a closer look at the study and found that beyond just the industry funding of the study, there were significant conflicts of interest that went undisclosed in the report itself and in presentations of the report, and those involved Moniz and several other key authors of the study. So, as it turns out, it was not only just funded by industry, it was also authored by industry representatives.

AMY GOODMAN: Kevin Connor, I wanted to turn to a 2011 press conference at the MIT Energy Initiative, where Ernest Moniz introduced the study now under contention, "The Future of Natural Gas." In his opening remarks, Professor Moniz emphasized the report’s independent of its sponsors and advisers.

ERNEST MONIZ: I do want to emphasize a disclaimer, if you like, that while their advice was absolutely critical, they are not responsible for the recommendations and the findings. We have not asked for endorsement. We asked for their advice; we received it. But the results, then, are our responsibility.

AMY GOODMAN: Later in the presentation, co-chair Anthony Meggs introduces the MIT report’s findings, saying environmental impacts associated with fracking are, quote, "challenging but manageable." However, Meggs failed to disclose he had joined the gas company Talisman Energy prior to the release of the study.

ANTHONY MEGGS: ... messages are very simple. First of all, there’s a lot of gas in the world, at very modest cost. As you will see, gas is still, globally speaking, a very young industry with a bright future ahead of it. Secondly, and perhaps obviously at this stage, although not so obvious when we started three years ago, shale gas is transformative for the economy of the United States, North America, for the gas industry, in particular, and potentially on a global scale. Thirdly, the environmental impacts of shale development, widely discussed and hotly debated, are—and we use these words carefully—challenging but manageable.

AMY GOODMAN: Kevin Connor, your response?

KEVIN CONNOR: It’s absolutely outrageous for the Energy Initiative, for Moniz and MIT to pretend this is independent of industry, well, first of all, given the fact that the sponsors of the report are all, you know, industry organizations and companies like Chesapeake Energy. Moniz was attempting to say that it was somehow insulated from the influence of these gas companies, when in fact authors of the study, such as Moniz and Meggs, were—had industry positions at the time.

Meggs’s quote there is particularly insidious, the fact that he is saying that fracking is safe for the environment, when he had actually joined Talisman Energy, a gas company, one of the most active frackers in the Marcellus Shale, a month before the study was released. So he is speaking to a roomful of journalists there, presenting a report designed to influence policy, and not disclosing that he is on the industry payroll. That is perhaps the last person in that room who should be presenting that finding or having anything to do with authoring that kind of report. And yet MIT and Moniz thought it was appropriate to put that spokesperson forward. So, it just goes to the fact that MIT was really sort of presenting an industry brochure here with a lot of pro-gas, industry advocacy talking points, and not revealing that there were significant conflicts of interest here.

AMY GOODMAN: Justin Elliott, would you like to weigh in?

JUSTIN ELLIOTT: Yeah, I mean, one thing to note is, Ernest Moniz is getting a confirmation hearing next month, and as part of that, he has to release a personal financial disclosure, and also, at some point later, he’ll have to—an ethics agreement will become public. So we should actually learn more about his current and recent involvement in these companies and possibly also stock holdings and that sort of thing, so it should be interesting. I think this story isn’t over yet.

AMY GOODMAN: We’re going to break and come back to this discussion. Our guests are Justin Elliott—he’s a reporter with ProPublica—and Kevin Connor, who has put out a report on—from the Public Accountability Project called "Industry Partner or Industry Puppet? How MIT’s Influential Study of Fracking Was Authored, Funded, and Released by Oil and Gas Industry Insiders." This is Democracy Now! We’ll be back in a minute.

[break]

AMY GOODMAN: In October of 2009, Obama’s energy secretary nominee, Ernest Moniz, introduced Tony Hayward, CEO of BP, before he delivered a speech at the MIT Energy Initiative. This took place six months before the BP Deepwater Horizon spill in the Gulf of Mexico.

ERNEST MONIZ: Tony, I think it’s fair to say, without getting into great details, faced a significant number of challenges at that time of transition and is, these days, getting quite good press, I might say, in terms of having the company operating well, producing and maintaining, I think, its stance, taken quite early, in terms of recognizing the need and acting on the need to address climate risk mitigation, for example, with its diversified portfolio. We are very pleased to have BP here as a member of the Energy Initiative—in fact, the founding—founding member of the MIT Energy Initiative. And in fact, as President Hockfield said just a few minutes ago to Tony, that that confidence shown in where we were going here at MIT, in terms of our focus on energy and environment, was very, very important, and we really appreciate that early support and the continuing relationship. In fact, many of you may know that besides the Energy Initiative, BP has a major presence in terms of a Projects Academy and Operations Academy with the Sloan School of Engineering. And in fact, I just heard, again, in the discussion a few moments ago, that 300 of BP’s 500 senior executives have, one way or another, interacted with MIT, so it’s really quite a substantial relationship.

AMY GOODMAN: That’s energy secretary nominee Ernest Moniz speaking in October 2009, praising BP CEO Tony Hayward six months before the BP oil spill. Justin Elliott of ProPublica?

JUSTIN ELLIOTT: I mean, one of the things that surprised me, actually, as I was researching this story, is the extent to which the MIT Energy Initiative is working with industry. I mean, it’s well known that they and other energy research projects get industry funding. But if you look at their annual reports and even their website, they say, if you give us money as a company, we will help you achieve specific business goals. So, I mean, in a lot of the coverage of Moniz, he has been presented as an academic, which he is, but in some ways I think the traditional categories are sort of failing us—sort of academic versus business executive. I mean, this really is a part of—I mean, it’s not formally part of BP, but they’re working as essentially a subcontractor for BP. So I think that’s really—and again, I mean, President Obama specifically praised Ernest Moniz’s ties with business when he introduced him. So, I mean, it’s up for interpretation whether or not these ties are a good thing, but I think that’s really the proper way to see his background and who he is.

AMY GOODMAN: Kevin Connor, I wanted to ask you about the broader issue of what some call
"frackademia," gas-industry-funded academic research. In February of 2012, a year ago, University of Texas Professor Charles Groat published a study that suggested fracking did not lead to groundwater contamination. However, the study did not disclose Groat’s seat on the board of major Texas fracker Plains Exploration and Production Company, for which he was reportedly given $400,000 in 2011. That’s more than double his university salary. I want to go to a clip of Professor Groat explaining his study’s finding.

CHARLES GROAT: The immediate concern with shale gas development and hydraulic fracturing was that fracturing at several thousand feet below the surface would put chemicals into groundwater that people drank that would be very bad for your health, and so people were very much opposed to hydraulic fracturing from that point of view. So, an important part of our study was to determine whether or not there is any direct, verified evidence that hydraulic fracturing itself was producing contaminated waters that ended up in that process in groundwater. Our preliminary finding is we have found no demonstrated evidence that that—demonstration that that has happened.

AMY GOODMAN: Kevin Connor, your response?

KEVIN CONNOR: Well, as you noted, Groat, when he was saying this, had a serious stake in a gas company called PXP, $1.6 million stake, made several hundred thousand dollars a year, over $400,000 a year in 2011, and was going before the public and saying fracking is safe, without disclosing any of these related interests. I mean, there’s some question as to whether someone with that sort of stake in the industry should be working on this at all, but at the very least it should be disclosed to the public, to journalists.

And because Groat didn’t disclose it, it resulted in a lot of blowback in Texas. The journalists were very concerned that Groat had not highlighted this for them when the report was released, and it resulted in quite a bit of media coverage. The University of Texas ended up commissioning an external review of the study, which concluded that the study should actually be retracted and noted that Groat’s conflict of interest was quite serious and should have been disclosed. So, the sorts of transgressions that we see at MIT have actually resulted in real accountability at other universities. Groat actually retired as a result of this episode. And the director of the Energy Institute at Texas, which is sort of an analog to MIT’s Energy Initiative—the director actually resigned in the wake of this external review. So there have been real consequences. There has been real pushback against this trend at other universities. And there’s some question as to whether that will happen with MIT.

AMY GOODMAN: Well, going back to Moniz, because you’re talking about Groat here, not to be confused with the energy secretary nominee of President Obama, talk about what he makes at MIT, both as a university professor but also his outside funding.

KEVIN CONNOR: I’m actually not sure of his salary at MIT. I don’t believe it’s publicly disclosed there, though it will be released in his financial disclosures. But as a board member at ICF International, which is an oil and gas—well, it’s a consulting firm with a significant energy practice and significant oil and gas ties—he’s made over $300,000 in the past two years since joining the board. This is a position where he attends several meetings a year. It’s certainly not a full-time position, and yet he’s making over $150,000 a year in stock and cash compensation. So these are not insignificant financial ties he has.

AMY GOODMAN: And finally, Justin Elliott, Ernest Moniz is a nuclear physicist. Can you talk about the significance of that for energy policy, if he were to become the next energy secretary?

JUSTIN ELLIOTT: Sure. I mean, actually, the Department of Energy, the majority of its budget goes to maintaining the nation’s nuclear weapons stockpile, and also they’re in charge of cleanup of old nuclear waste. He’s been a strong and public supporter of nuclear power. And that’s actually the area where some of these business ties get into areas of potential conflicts. As I mentioned earlier, he was previously on an advisory council of a uranium enrichment company called USEC, one of the—one of the largest, and they’ve been seeking a $2 billion loan guarantee from the Energy Department to build a centrifuge plant in Ohio. That’s been on hold for a few years while they look into it further. So, it will be interesting to see whether Moniz has to recuse himself from that or whether it gets mentioned in any of the congressional hearings, but that’s certainly one of the big areas the Energy Department is active in.

AMY GOODMAN: Professor Moniz wrote in Foreign Affairs in 2011, "It would be a mistake, however, to let Fukushima cause governments to abandon nuclear power and its benefits." He wrote, "Electricity generation emits more carbon dioxide in the United States than does transportation or industry, and nuclear power is the largest source of carbon-free electricity in the country."

JUSTIN ELLIOTT: Right. And again, I mean, I think this is in keeping with President Obama’s, quote, "all-of-the-above," unquote, energy policy. I mean, this is—this is Obama nominating someone as energy secretary who is in keeping with the administration’s stated policy.

AMY GOODMAN: President Obama has long been pro-nuclear power—in fact, is the one who is restarting nuclear power plants after, what, some 40 years of the last one being built.

JUSTIN ELLIOTT: Right. And I think the only reason that effort has stalled is the price of natural gas, because of fracking, going down so low that nuclear power plants have become less economically feasible than they were five years ago.

AMY GOODMAN: Final comments, Kevin Connor, as you release your report, director of Public Accountability Initiative, the report that you did called "Industry Partner or Industry Puppet?" has MIT responded? And were you able to speak with Professor Moniz?

KEVIN CONNOR: I did call the Energy Initiative but was not able to speak with Dr. Moniz. And the Energy Initiative did actually respond, through a spokesperson, with a statement that didn’t really speak to questions I had raised about how the conflicts of interest surrounding the report were managed and disclosed. One critical conflict of interest I didn’t note earlier was that one of the study authors, John Deutch, was on the board of Cheniere Energy, a liquefied natural gas company, LNG export company. That wasn’t disclosed in the study. The study actually endorsed natural gas exports. He has a $1.6 million stake in that company. MIT Energy Initiative—

AMY GOODMAN: Central Intelligence Agency?

KEVIN CONNOR: —basically had no response, just said that the authors aren’t biased, which is hard to believe, given these connections.

AMY GOODMAN: Kevin, John Deutch, the former head of the Central Intelligence Agency?

KEVIN CONNOR: Exactly. Former director of the CIA was actually a study author here and is on the board of the only company in the U.S. to receive permits to export LNG from the lower 48 states. And again, this study endorsed LNG exports on fairly—a fairly thin basis of evidence and didn’t disclose this connection, which is really, again, quite outrageous.

AMY GOODMAN: Well, I want to leave it there; of course, we’ll continue to follow the nominee. The confirmation hearings will take place on April 9th. Justin Elliott, ProPublica reporter, and Kevin Connor, I want to thank you very much for being with us. Justin wrote "Drilling Deeper," looking at "The Wealth of Business Connections for Obama’s Energy Pick." And Kevin Connor wrote the study, "Industry Partner or Industry Puppet? How MIT’s Influential Study of Fracking Was Authored, Funded, and Released by Oil and Gas Industry Insiders." We will link to it at democracynow.org.

This is Democracy Now!, democracynow.org, The War and Peace Report. And when we come back, we’ll be joined by a well-known anchor here in New York, Cheryl Wills, who in this month of Women’s History Month—and we’ve just come out of African-American History Month—we’ll talk about what she found about her family. She wrote the book, Die Free: A Heroic Family Tale. Stay with us.

The Failure of Laissez Faire Capitalism and Economic Dissolution of the West

paulcroberts

Author’s  Note

I receive numerous questions from readers about our economic situation and the condition of civil liberty.

There is no way I can answer so many inquiries, and no need. I have written two books that provide the answers, and they are inexpensive. I have done my job. It is up to you to inform yourself. Kindle Reader software is available as a free online download that permits you to read ebooks in your own web browser.

My latest, The Failure Of Laissez Faire Capitalism And Economic Dissolution of the West , is available as an ebook in English as of March 2013 from Amazon.com and from Barnes&Noble.

My book is endorsed by Michael Hudson and Nomi Prims and has a 5 star rating from Amazon reviewers (as of March 23, 2013). Pam Martens’ review at Wall Street On Parade is available here

Libertarians who have not read the book have had an ideological knee-jerk reaction to the title. They demand to know how can I call the present system of crony capitalism laissez faire. I don’t. The current system of government supported crony capitalism is the end result of a 25-year process of deregulation.

Deregulation did not produce libertarian nirvana. It produced economic concentration and crony capitalism.

Amazon provides as a free read the introduction by Johannes Maruschzik to the German edition. Below is my Introduction to my book.

Paul Craig Roberts, March 27, 2012

Not only has your economy been stolen from you but also your civil liberties. My coauthor Lawrence Stratton and I provide the scary details of the entire story in The Tyranny of Good Intentions [5]. In the US law is no longer a shield of the people against arbitrary government. Instead, law has been transformed into a weapon in the hands of the government.

Josie Appleton documents that in England also law has been turned into a weapon against the people. http://www.spiked-online.com/site/printable/13420/ [6] Anglo-American law, the foundation of liberty and one of the greatest human achievements, lies in ruins.

Libertarians think that liberty is a natural right, and some Christians think that it is a God-given right. In fact, liberty is a human achievement, fought for by Englishmen over the centuries. In the late 17th century, the achievement of the Glorious Revolution was to hold the British government accountable to law. William Blackstone heralded the achievement in his famous Commentaries On The Laws Of England, a bestseller in pre-revolutionary America and the foundation of the US Constitution.

In the late 20th century and early 21st century, governments in the US and Great Britain chafed under the requirement that government, like the people, is ruled by law and took steps to free government from accountability to law.

Appleton says that the result is a “tectonic shift in the relationship between the state and the citizen.” Citizens of the US and UK are once again without the protection of law and subject to arbitrary arrests and indictments or to indefinite detention in the absence of indictments.

In the US, citizens can be detained indefinitely and even executed without due process of law. There is no basis in the US Constitution for these asserted powers. The unconstitutional powers exist only because Congress, the judiciary and the American people have accepted the lie that the loss of civil liberty is the price paid for protection against terrorists.

In a very short time the raw power of the state has been resurrected. Most Americans are oblivious to this outcome. As long as government is imprisoning and killing without trials demonized individuals whom Americans have been propagandized to fear, Americans approve. Americans do not understand that a point is reached when demonization becomes unnecessary and that precedents have been established that revoke the Bill of Rights.

If you are educated by these two books, you will be better able to understand what is happening and, thus, you will be in a better position to survive what is coming.

Introduction to The Failure of Laissez Faire Capitalism and Economic
Dissolution of the West: Towards a New Economics for a Full World

The collapse of the Soviet Union in 1991 and the rise of the high speed Internet have proved to be the economic and political undoing of the West. “The End Of History” caused socialist India and communist China to join the winning side and to open their economies and underutilized labor forces to Western capital and technology. Pushed by Wall Street and large retailers, such as Wal-Mart, American corporations began offshoring the production of goods and services for their domestic markets. Americans ceased to be employed in the manufacture of goods that they consume as corporate executives maximized shareholder earnings and their performance bonuses by substituting cheaper foreign labor for American labor. Many American professional occupations, such as software engineering and Information Technology, also declined as corporations moved this work abroad and brought in foreigners at lower renumeration for many of the jobs that remained domestically. Design and research jobs followed manufacturing abroad, and employment in middle class professional occupations ceased to grow. By taking the lead in offshoring production for domestic markets, US corporations force the same practice on Europe. The demise of First World employment and of Third World agricultural communities, which are supplanted by large scale monoculture, is known as Globalism.

For most Americans income has stagnated and declined for the past two decades. Much of what Americans lost in wages and salaries as their jobs were moved offshore came back to shareholders and executives in the form of capital gains and performance bonuses from the higher profits that flowed from lower foreign labor costs. The distribution of income worsened dramatically with the mega-rich capturing the gains, while the middle class ladders of upward mobility were dismantled. University graduates unable to find employment returned to live with their parents.

The absence of growth in real consumer incomes resulted in the Federal Reserve expanding credit in order to keep consumer demand growing. The growth of consumer debt was substituted for the missing growth in consumer income. The Federal Reserve’s policy of extremely low interest rates fueled a real estate boom. Housing prices rose dramatically, permitting homeowners to monetize the rising equity in their homes by refinancing their mortgages.

Consumers kept the economy alive by assuming larger mortgages and spending the equity in their homes and by accumulating large credit card balances. The explosion of debt was securitized, given fraudulent investment grade ratings, and sold to unsuspecting investors at home and abroad.

Financial deregulation, which began in the Clinton years and leaped forward in the George W. Bush regime, unleashed greed and debt leverage. Brooksley Born, head of the federal Commodity Futures Trading Commission, was prevented from regulating over-the-counter derivatives by the chairman of the Federal Reserve, the Secretary of the Treasury, and the chairman of the Securities and Exchange Commission. The financial stability of the world was sacrificed to the ideology of these three stooges that “markets are self-regulating.” Insurance companies sold credit default swaps against junk financial instruments without establishing reserves, and financial institutions leveraged every dollar of equity with $30 dollars of debt.

When the bubble burst, the former bankers running the US Treasury provided massive bailouts at taxpayer expense for the irresponsible gambles made by banks that they formerly headed. The Federal Reserve joined the rescue operation. An audit of the Federal Reserve released in July, 2011, revealed that the Federal Reserve had provided $16 trillion–a sum larger than US GDP or the US public debt–in secret loans to bail out American and foreign banks, while doing nothing to aid the millions of American families being foreclosed out of their homes. Political accountability disappeared as all public assistance was directed to the mega-rich, whose greed had produced the financial crisis.

The financial crisis and plight of the banksters took center stage and prevented recognition that the crisis sprang not only from the financial deregulation but also from the expansion of debt that was used to substitute for the lack of growth in consumer income. As more and more jobs were offshored, Americans were deprived of incomes from employment. To maintain their consumption, Americans went deeper into debt.

The fact that millions of jobs have been moved offshore is the reason why the most expansionary monetary and fiscal policies in US history have had no success in reducing the unemployment rate. In post-World War II 20th century recessions, laid-off workers were called back to work as expansionary monetary and fiscal policies stimulated consumer demand. However, 21st century unemployment is different. The jobs have been moved abroad and no longer exist. Therefore, workers cannot be called back to factories and to professional service jobs that have been moved abroad.

Economists have failed to recognize the threat that jobs offshoring poses to economies and to economic theory itself, because economists confuse offshoring with free trade, which they believe is mutually beneficial. I will show that offshoring is the antithesis of free trade and that the doctrine of free trade itself is found to be incorrect by the latest work in trade theory. Indeed, as we reach toward a new economics, cherished assumptions and comforting theoretical conclusions will be shown to be erroneous.

This book is organized into three sections. The first section explains successes and failures of economic theory and the erosion of the efficacy of economic policy by globalism. Globalism and financial concentration have destroyed the justifications of market capitalism. Corporations that have become “too big to fail” are sustained by public subsidies, thus destroying capitalism’s claim to be an efficient allocator of resources. Profits no longer are a measure of social welfare when they are obtained by creating unemployment and declining living standards in the home country.

The second section documents how jobs offshoring or globalism and financial deregulation wrecked the US economy, producing high rates of unemployment, poverty and a distribution of income and wealth extremely skewed toward a tiny minority at the top. These severe problems cannot be corrected within a system of globalism.

The third section addresses the European debt crisis and how it is being used both to subvert national sovereignty and to protect bankers from losses by imposing austerity and bailout costs on citizens of the member countries of the European Union.

I will suggest that it is in Germany’s interest to leave the EU, revive the mark, and enter into an economic partnership with Russia. German industry, technology, and economic and financial rectitude, combined with Russian energy and raw materials, would pull all of Eastern Europe into a new economic union, with each country retaining its own currency and budgetary and tax authority. This would break up NATO, which has become an instrument for world oppression and is forcing Europeans to assume burdens of the American Empire.

Sixty-seven years after the end of World War II, twenty-two years after the reunification of Germany, and twenty-one years after the collapse of the Soviet Union, Germany is still occupied by US troops. Do Europeans desire a future as puppet states of a collapsing empire, or do they desire a more promising future of their own?

Capitalism in Crisis: Richard Wolff Urges End to Austerity, New Jobs Program, Democratizing Work

Truthout needs your support to produce grassroots journalism and disseminate conscientious visions for a brighter future. Contribute now by clicking here.

As Washington lawmakers pushes new austerity measures, economist Richard Wolff calls for a radical restructuring of the U.S. economic and financial systems. We talk about the $85 billion budget cuts as part of the sequester, banks too big to fail, Congress’ failure to learn the lessons of the 2008 economic collapse, and his new book, "Democracy at Work: A Cure for Capitalism." Wolff also gives Fox News host Bill O’Reilly a lesson in economics 101.

TRANSCRIPT:

AMY GOODMAN: "Anda," music by the pianist, arranger and composer Bebo Valdés. He died Friday at the age of 94. The son of a cigar factory worker and grandson of a slave, he studied classical music at the Conservatorio Municipal in Havana and became a favorite collaborator with the great Cuban singers of his era, including Beny Moré and Pío Leyva and Orlando Cascarita Guerra, along with Americans such as Woody Herman and Nat King Cole, was considered a giant during the golden age of Cuban music. This is Democracy Now!, democracynow.org, The War and Peace Report.

Our guest is Richard Wolff, a professor emeritus at the University of Massachusetts, Amherst, now at New School University, author of a number of books, including Democracy at Work: A Cure for Capitalism.

I want to talk about austerity here at home. This is House Speaker John Boehner speaking last month defending the $85 billion budget sequester cuts that took effect on March 1st.

HOUSE SPEAKER JOHN BOEHNER: The American people know, the president gets more money, they’re just going to spend it. And the fact is, is that he’s gotten his tax hikes. It’s time to focus on the real problem here in Washington, and that is spending.

AMY GOODMAN: House Speaker John Boehner. Professor Richard Wolff, your response? And also, that the Obama administration was warning catastrophe if sequestration took place. It took place.

RICHARD WOLFF: Well, it’s a stunning comment on our dysfunctional government built on top of a dysfunctional economy. Here we are in the middle of a crisis. We have millions of people without work, millions of people losing their homes, an economy that doesn’t work for the vast majority. The United States government is one of the major customers for goods and services in America. Sequestration is simply a cutback in government spending. It doesn’t take rocket science to understand that if the government, as the largest single buyer of goods and services, cuts back on the goods and services it buys, that means companies across America will sell less, and they’ll have less need of workers, and they will lay off workers. So, this is an act that worsens an unemployment that is already severe.

If you put that together with the tax increase on January 1st—and let me say a word about that. We heard a lot of public debate about taxing rich people, not taxing rich people, Republicans and Democrats, but the tax on the wealthy is small compared to the tax on the middle and lower incomes that went up on January 1st. When we raised the payroll tax here in America from 4.2 to 6.2 percent, we raised over $125 billion—huge amount of money, much more than was raised by taxing the rich—and we savaged the middle- and lower-income groups in America, those that in the presidential election both candidates had sworn to save and support. We attacked them, thereby limiting their capacity to buy goods and services because we taxed them more.

You put together the taxing of the middle and lower incomes with the cutbacks of government spending, and you’re going to do what every European country that has imposed austerity has already discovered: You’re making the problem worse. So with all the homilies that Mr. Boehner can put out there about how spending is a problem, this abstract idea doesn’t change the fact you’re making the economic conditions of the mass of people worse by these austerity steps, not better. And that ought to be put as the fire burning at the feet of politicians, so they stop talking these abstractions and deal with the reality of what they’re doing.

AMY GOODMAN: So what do you think needs to be done?

RICHARD WOLFF: A radical change in the policies. And I think it has to go far beyond simply reversing this austerity program, which, again, just for a word about history, back in the 1930s, the last time we had a breakdown of our capitalist system like this, we didn’t have austerity, we didn’t have cutbacks. We had the opposite. Roosevelt, in the middle of the '30s, created the Social Security system, went to everybody over 65 and said, "I'm going to give you a check for the rest of your life." He created the unemployment compensation system, giving all the unemployed for the first time checks every week for a year or two. And he created a public employment program and hired millions of workers. It’s the opposite of austerity. So any politician who says, "We must do this, because there’s no option," has forgotten even the American history of not that long ago.

So, the first thing I would do is go in that direction—not austerity, but its opposite. But I want to go further, because I think our problem is deeper. This crisis wasn’t supposed to happen. When it happened, it wasn’t supposed to last a long time. All of that has been proven false. The problems run deep. And I think what we have to do, and what that book tries to do, is to talk about reorganizing our economy so that for the first time we can say we’re not only going to get out of this crisis, we’re taking the kinds of steps that can prevent us from having them over and over again as our unstable business-cycle-ridden economy keeps imposing on us. So, for me, it’s the more profound change that we finally have to face, painful as it is. After 50 years of a country unwilling to face these questions, I think we need basic change. And that’s what I spend most of my time stressing.

AMY GOODMAN: Before we talk about the basic change, "democracy at work," as you put it—

RICHARD WOLFF: Right.

AMY GOODMAN: —what could Obama do without congressional support right now?

RICHARD WOLFF: Well, I think, in many ways, he could initiate a public employment program. I think it’s long overdue that he find all the ways available to him to say what Roosevelt said—and not that Roosevelt did everything correctly, and not that he’s a genius or any of that, but to take some lessons from those people in our country before who took steps that were successful.

AMY GOODMAN: I mean, Roosevelt didn’t plan on doing this when he first took office.

RICHARD WOLFF: Absolutely. He had pressure from below. The CIO, the biggest union-organizing drive in American history, never had anything that successful before.

AMY GOODMAN: As in AFL-CIO.

RICHARD WOLFF: That’s right. And with the socialist and communist parties, who were strong at that time, working with them, they organized millions of Americans into unions who had never joined a union before, and they pushed from below in a very powerful way. And they changed Mr. Roosevelt, showing that politicians, if subject to pressure from below, can change—same lesson that Cyprus has just taught us yet again. So, my response is: Learn from that. Roosevelt went on the radio to the American people and said, basically, "If the private sector either cannot or will not provide work for the millions of Americans that need and want to work, then it’s my job as president to do it." And he did it.

And I think Mr. Obama could and should overcome whatever has made him hesitate. We in this country not only don’t have a federal employment program, the Republicans and Democrats haven’t even put it on the floor to debate it as an important issue, even though it comes out of our own history. So I would say, put us—put our people to work. They want to work. The Federal Reserve says 20 percent of our tools, equipment, factory and office space is sitting idle, unused. So we have the people who want to work; we have the tools, equipment and raw materials for them to work with. And lord knows we need the wealth they could produce. Put them to work, and make it a national issue that that happen.

AMY GOODMAN: Where does the money come from?

RICHARD WOLFF: Well, Roosevelt went to the wealthy, and he went to the corporations, and he said to them, "You must give me the money to take care of the mass of people, because if you don’t, we’re going to have a catastrophe in this country. We’re going to have a social revolution." My argument is, let’s go back to the same tax rates that Roosevelt imposed, or at least in that neighborhood, which is much higher on wealthy people and much higher on corporations than we have today. That’s what he did. That’s how he funded it.

And in case our politicians are worried, let’s remind them: Mr. Roosevelt, who took those daring steps, was re-elected to be president four consecutive times, the most popular president in American history. It’s not a dead-end political decision. It’s the best decision a president could make to leave his legacy in history, that, we are told, our presidents care so much about.

AMY GOODMAN: We’re talking to Richard Wolff, author of Democracy at Work. Again, before we talk about "democracy at work," I wanted to go to a recent hearing in Washington. Executives with the banking giant JPMorgan Chase appeared before a Senate panel earlier this month to answer questions around so-called "London Whale trades" that cost the bank more than $6 billion and derailed financial markets worldwide. This is Arizona Republican Senator John McCain criticizing JPMorgan’s actions.

SEN. JOHN McCAIN: JPMorgan completely disregarded risk limits and stonewalled federal regulators. It is unsettling that a group of traders made reckless decisions with federally insured money and that all of this was done with the full awareness of top officials at JPMorgan. This bank appears to have entertained—indeed, embraced—the idea that it was, quote, "too big to fail."

AMY GOODMAN: Ashley Bacon, JPMorgan’s interim chief risk officer, testified at the same hearing.

ASHLEY BACON: I don’t think it is too big to fail. I think there’s further work that needs to be done to demonstrate and document that, and it’s in process. I’m not leading that process or deeply involved in it, but I think it is—it’s something that needs to be demonstrated to everybody’s satisfaction.

AMY GOODMAN: That was Ashley Bacon, JPMorgan’s interim chief risk officer. Can you explain what took place here and what is happening?

RICHARD WOLFF: Yes. On the question of "too big to fail," there really isn’t much to say. In 2008, our banks failed—all of them—the way the Cyprus banks failed and for very similar reasons. They took in a lot of depositors’ money, and they made risky bets they shouldn’t have made, and they failed, and so they didn’t have the money to honor their obligations, and they turned to the government for a bailout. And when the government hesitated, because it’s public money to bail out a privately failed bank, they were told, in another kind of blackmail, "We’re too big to fail. If you don’t bail us out, we will collapse and take the entire economy with us." And that was a persuasive argument. Particularly after they allowed Lehman Brothers to fail and that nearly did take the economy with it, that was a convincing argument.

You would have thought they had then learned the lesson about the problem of a too-big-to-fail financial institution. If you thought that, you would have been wrong, because the same banks that were too big to fail in 2008 are, all of them, bigger today. So we didn’t learn the lesson. We didn’t break up the banks. We didn’t limit, control their growth. They’re bigger now than they were then. And in a sense, maybe shame on them the first time, but having allowed this to happen, it’s shame on us.

Number two, we seem to need, as a nation, to believe that we have the power to control, limit or regulate, whether it’s the Glass-Steagall Act that came out of our disaster of the 1930s or the Dodd-Frank Act, which came out of the disaster that started in 2008. We seem to want to believe we can leave in place private banks, no matter how big they are, and hedge them about with regulations. The proof of the Whale trades in London, the proof of everything we know, is that these banks have the money, the staff, the resources to work their way around the regulations at least as fast as we impose them on them. That’s what these hearings fundamentally show. They can make trades that are too risky. They can lose wild amounts of money. They can turn to the government and demand to be helped and bailed out each time. And they get it. We are telling them, in a classic example, "Look, do whatever you want. You don’t have any risk of fundamental failure and punishment." Regulation doesn’t work, because we believe in place an entity, a large corporation, with the money and the incentives to get around it.

AMY GOODMAN: Interestingly, Jamie Dimon, the head of JPMorgan Chase, did not testify. He was brought before the Senate, what, about last June, where the senators were asking him for advice. And then, when you looked at the senators on the Senate committee and how much money JPMorgan Chase had given each of them, we’re talking about millions of dollars went to many of them.

RICHARD WOLFF: When I say that the big corporations, particularly the banks, have the resources and the incentives, I’m being polite. Yeah, part of the resources are going into literally making sure that the political regulator is a good friend and understands the complexities. In simple English, they are buying their way into the situation we watch, which is: "We will pretend to be regretful. You will pretend to be protecting the public. You will make regulations that we help you write so that we can get around them." It is something that ought not to be allowed to continue, because we’re living the economic crisis that comes from that way of doing business.

AMY GOODMAN: What lessons have been learned since 2008? And today, could the U.S. see the same situation as Cyprus?

RICHARD WOLFF: Absolutely. We have banks that are literally telling us, because we know from our controls that they are trying, even, to regenerate it. They’re trying to get people to borrow more money again. We’re not changing the wage structure of America, which means that Americans are required to go into debt to supplement their wages. You know, the irony is, we are trying, in the language of some of these folks, to kickstart our economy, to get it going again. But the problem is, our economy was a train heading into a stone wall in the first years of this century, and if we get our economy going again, without fundamental changes, what we’re doing is putting that same train back on the track heading towards the same wall. Cyprus shows us what’s happening.

But we don’t have to take just small countries. Take Great Britain, our classic ally. Their economy is now in the second or, in some people’s minds, the third recession within the crisis since 2007. They are following an austerity problem—process exactly like that supported by Mr. Boehner, and the economic downturn in Great Britain is catastrophic for that society. And so, we have this image of a future for us, if we don’t make fundamental change, but everyone wants to put it away and pretend that we can let it go by itself or a few regulations will solve the problem. They haven’t. They’re not doing it now elsewhere. That’s not a strategy we should pursue in this country, either.

AMY GOODMAN: When we come back, we’ll talk to Professor Richard Wolff about the alternatives, about, well, what he’s put forward, Democracy at Work: A Cure for Capitalism. This is Democracy Now! We’ll be back with Professor Wolff in a minute.

[break]

AMY GOODMAN: We continue with Richard Wolff, professor emeritus of economics at University of Massachusetts, Amherst, visiting professor at New School University here in New York, does a weekly program on WBAI in New York called Economic Update every Saturday at noon. His latest book is Democracy at Work: A Cure for Capitalism. So what exactly do you mean by this?

RICHARD WOLFF: What I mean is a change in the enterprises that produce the goods and services we all depend on and provide the jobs we all need and want. I think those have to be, in a fundamental way, democratized. So let me begin in that way.

We live in a country that says it goes to war around the world to bring democracy and that its central, most important political value is democracy. If you believe that—and I am a fervent supporter of democracy, and obviously you are—you’ve named your program that way—then we ought to have democracy in the place where we as adults spend most of our time. Five out of seven days we go to work. We walk into a place where we use our brains and our muscles eight or more hours, five out of seven days. If democracy is an important value, it ought to be right there, first and foremost. But we don’t. We basically have a situation where, for most of us, we go to work in a place where the decisions that are made are made by a tiny group of people. The major shareholders who own the block of shares in our system select a board of directors, 15 to 20 people, and they make the basic decisions: what to produce, how to produce it, where to produce it, and what to do with the profits. The rest of us must live with the results of that decision.

So if that tiny group of people make a decision to close the factory in Cincinnati or the office in Atlanta and move to Shanghai, the chips fall where they may. If they decide to use a toxic technology that’s not good for the air and water but is good for the profits, they do, we live with the results. And when they decide to take the profits of their business and to give enormous pay packages to a handful of top executives and big dividend payouts to their shareholders, which of course they do, since they’re in a position to do it, and the rest of us suddenly have to take out absurd debts to get our kids through college, then that’s the inequality of income and wealth that we have in America.

So, I look at this decision-making apparatus, I say, "Why are we surprised that they make the decisions the way we do—they do?" We all live with the results, and we have no say in how those decisions are made. It’s not democratic. That’s the first thing. But the second thing is, we’re now in five years of economic crisis that indicate that way of organizing the decisions doesn’t work for the mass of people. It works for them. The stock market’s back. The profits of big corporations are back—surprise, surprise—given who makes the decisions. But we are left.

And so, for me, the solution is, let’s face this. Let’s build an option, a real choice for Americans, between working in a non-democratic, top-down-organized capitalist enterprise or in what, for lack of a better term, we can call "cooperatives," workplaces that are organized democratically. I think we’ll have less inequality of income, we will have less pollution of our environment, and we’ll have less loss of jobs out of the country, if those decisions were made by the people, as they should have been from the beginning, who will not make the kinds of decisions that got us into the mess of economic crisis that we’re in now.

AMY GOODMAN: In June, you wrote a piece, Richard Wolff, in The Guardian called "Yes, There is an Alternative to Capitalism: Mondragon Shows the Way." Mondragon, Spain’s renowned co-op where all enterprise is owned and directed by co-op members. At the Green Party’s convention last year, the keynote speaker, Gar Alperovitz, said the Mondragon model is being replicated here in the United States. I want to just turn to a clip of what Gar Alperovitz said, the professor of political economy at the University of Maryland.

GAR ALPEROVITZ: So, in Ohio, the idea of worker ownership is a bigger idea. Lots of people understand it. And in Cleveland, building on the Mondragon model—some of you know about the Mondragon model—and other ideas, there are a series of worker-owned, integrated co-ops in Cleveland in a neighborhood where the average income is $18,000 per family. And they have got these co-ops, not just standing alone, but linked together with a nonprofit corporation and a revolving fund. The idea is to build the community and worker ownership, not just make a couple workers richer, to say the least, not rich, but to build a whole community, and to use the purchasing power of hospitals and universities—tax money in there—Medicare, Medicaid, education money, buy from these guys, and build the community. That model—and it’s the greenest for—one of the things is the greenest laundry in that part of the country, that uses about a third of the heat and about a third of the electricity and about a third of the water. They’re on track now to put in more solar capacity that exists—one of the other worker-owned companies—that exists in the entire state of Ohio. These are not little, dinky co-ops.

AMY GOODMAN: That was Gar Alperovitz talking about the Mondragon model here. And when we were in Spain, Democracy Now! went to Mondragon and interviewed one of the cooperative members, and we’ll link to that at democracynow.org [ Click here to watch the interview with Mikel Lezamiz, director of Cooperative Dissemination at the Mondragon Cooperative Corporation in Spain’s Basque Country. ] But, Richard Wolff, talk about that model and what’s happening here.

RICHARD WOLFF: Well, the model of Mondragon is so interesting, not only because it’s a real co-op, where the workers make the decisions—what to produce, how, where, what to do with the profits. And just to mention one of their achievements, they have a rule that the highest-paid worker cannot get more than a maximum of eight times the lowest. In our society, it’s typical in our large corporations that the CEO gets 300 to 400 times what the lowest worker. So, for those of us that are interested in a less unequal society than what we have here in America, the lesson is, if you cooperatize your enterprise, that’s a sure route to get there. And we haven’t found any other route that is just as effective.

So, the importance of Mondragon is, they start in the middle of the 1950s with a Catholic priest, Father Arizmendi—I always have to remember it—with six workers in the north of Spain, desperately trying to overcome the unemployment there. And here we are over a half a century later. Having to compete with countless capitalist enterprises, they won that competition. Trying to grow, they have a growth record that would be the envy of any capitalist corporation. They went from six workers in 1956 to 120,000 workers today in Spain.

AMY GOODMAN: And they are making?

RICHARD WOLFF: And they are making everything. They make dishwashers. They make clothes washers. They raise rabbits on farms. They do high-tech research, together with General Motors and Microsoft as some of their partners there. They do an immense array. They’re really a family of 200 to 300 co-ops that are united within the Mondragon cooperative corporation. So they’ve shown the ability to grow. They’ve shown the ability to adapt. They’ve shown their competitive power. They have—excuse me, they’ve shown all the different ways that a corporation can develop without a top-down hierarchical, undemocratic structure. So we don’t have to choose between effectiveness, growth, job, security, and a cooperative structure. The cooperative structure can be a way to get there.

Here in the United States, we have lots of such co-ops developing. There’s one even named after Father Arizmendi in California in the Bay Area. There are six Arizmendi bakeries and coffee shops that were set up on that model. They started with one; they’re now six. Hint: They’ve grown. And you can do this. And all over the United States, there are these efforts, often done by people who want a different kind of life. They want to be in charge of their own job. They want to have a sense of control and a sense that they’re not just a drone doing the work, but they’re part of the folks who design and direct. It brings out new capacities. It makes you more happier to go to work. It’s a more satisfying job life than you would otherwise have. So I think it recommends itself on all kinds of levels.

One other example, we can learn something from a country called Italy that we admire for its cuisine and its lovely countryside. They have a law there, passed in 1985, called the Marcora Law after the name of the legislator. Here’s what it does. It offers a choice to unemployed workers. You can take a dole every week, an unemployment check, the way we do in this country, or you have an option, an option B that we don’t have. If you get at least nine other workers to make the—unemployed workers, like yourself, to make the following choice, here’s what you can get. As a lump sum, you can get your entire unemployment program of two years of checks in your hands right at the beginning; you have to have nine other workers or more, and you have to use that money as the start-up capital for a cooperative enterprise. The idea of the Italian government was, if we give workers this to set up a job and an enterprise, they will be much more committed to it than they would if they didn’t have that role.

AMY GOODMAN: How do they know they’ll do it?

RICHARD WOLFF: They don’t. But they know those workers have an incentive, because if they don’t make that work, they can’t go back and collect unemployment. That’s what they got. The government doesn’t spend much more money than it would have anyway, but it creates jobs, and it creates workers committed, because it’s their enterprise, to make that work as their personal solution and as a way not only for them to survive, but for the whole of the Italian society for the first time to see what it’s like to have an enterprise where you run the affair.

You know, here in America, we want to believe in freedom of choice. Let’s give our people freedom of choice. They can have the choice to go work in a top-down, capitalist enterprise—what we’re used to—but if we develop the alternative, really a program of co-ops around the country, then American young people and older people could say, "What would it be like to work there? Let’s see what that’s like." And then we would have the choice we do not have in this country now.

AMY GOODMAN: Professor Wolff, before we end, I want to turn back to the crisis in Cyprus and relate it to what’s happening here. Bill O’Reilly of Fox News warned his audience last week that Cyprus and other European countries are facing economic hardships because they’re so-called "nanny states."

BILL O’REILLY: Greece, Italy, Spain, Portugal, Ireland, now Cyprus, all broke. And other European nations are close. Why? Because they’re nanny states, and there are not enough workers to support all the entitlements these progressive paradises are handing out.

AMY GOODMAN: That’s Bill O’Reilly of Fox News. Richard?

RICHARD WOLFF: You know, he gets away with saying things which no undergraduate in the United States with a responsible economic professor could ever get away with. If you want to refer to things as nanny states, then the place you go in Europe is not the southern tier—Portugal, Spain and Italy; the place you go are Germany and Scandinavia, because they provide more social services to their people than anybody else. And guess what: Not only are they not in trouble economically, they are the winners of the current situation. The unemployment rate in Germany is now below 5 percent. Ours is pushing between 7 and 8 percent. So, please, get your facts right, Mr. O’Reilly. The nanny state, you call it, the program of countries like Germany and Scandinavia, who tax their people heavily, by all means, but who provide them with social services that would be the envy of the United States—a national health program that takes care of you, whether you’re employed or not, and gives you proper healthcare. In France, for example, the law says when you go to work, you get five weeks’ paid vacation. That’s not an option; that’s the law. You get support when you’re a new parent for your child care and so forth. They provide services. And they are successful in Germany and Scandinavia, much more than we are in the United States and much more than those countries in the south.

So they’re not broken, the south, because they’re nanny states, since the nanny states, par excellence, are doing better than everyone. The actual truth of Mr. O’Reilly is the opposite of what he says. The more you do nanny state, the better off you are during a crisis and to minimize the cost of the crisis. That’s what the European economic situation actually teaches. He’s just making it up as he goes along to conform to an ideological position that is harder and harder for folks like him to sustain, so he has to reach further and further into fantasy.

AMY GOODMAN: In our last minute, other cures for capitalism, as you put it?

RICHARD WOLFF: Well, I think that there’s a set of fundamental reorganizations. When you have a private banking system in the United States, the way we did up until, say, the 1970s and '80s, you had it in a position relative to the economy that made a certain sense. But over the last 30 and 40 years, for a whole host of reasons, we have made debt a central part of the economy. Today it is not unusual for a person who goes into a grocery store to get a bottle of water to use a credit card, basically to make a loan in order to buy that bottle of water. Everything that consumers do is now mediated by debt. Everything corporations do, and as we look around the world, the governments are in debt. Debt is everywhere. It has become the water we swim in, the air we breathe. That puts the banks in an unbelievably powerful position, because they're the repository of the means to borrow. If we’re going to make an economy dependent on debt, we can’t leave the power to control that—

AMY GOODMAN: We have 10 seconds.

RICHARD WOLFF: —in the private hands of banks. Either we don’t become a debt-ridden country, or we make borrowing and lending a social program. We can’t allow private banking. It doesn’t work. It needs to be changed.

AMY GOODMAN: Richard Wolff, I want to thank you for being with us. If you’d like a copy of today’s show, you can go to our website at democracynow.org. Richard Wolff is professor emeritus at University of Massachusetts, teaches at New School University.

The Fire Last Time: Workplace Safety Still Ignored Across the Globe

Two years ago this week, the 100th anniversary of the tragic Triangle Shirtwaist fire, the issue of workplace safety got a lot of attention.  Two years later things haven’t changed much except now the dangers are world-wide.  Last September nearly 300 workers died when trapped behind locked doors in a Pakistani textile factory fire.  Last November, 120 people died and about 100 others were injured in a fire at an eight-story textile factory Bangladesh. And in the two years since America memorialized the Triangle Fire victims with conferences, speeches, and an HBO special – Republicans in Congress have made sure nothing has been done to improve the situation in the United States, such as expanding the budget for the Occupational Safety and Health Administration and giving OSHA stronger regulatory teeth.Relatives mourn the death of a garment worker after a fire swept through the Tazreen Fashion factory in Bangladesh's capital last year killing more than 100 people. (Photo: Andrew Biraj/REUTERS )

A century ago, on March 25, 1911, 146 garment workers, most of them Jewish and Italian immigrant girls in their teens and twenties, perished after a fire broke out at the Triangle Waist Company in New York City’s Greenwich Village. Even after the fire, the city’s businesses continued to insist they could regulate themselves, but the deaths clearly demonstrated that companies like Triangle, if left to their own devices, would not concern themselves with their workers’ safety. Despite this business opposition, the public’s response to the fire and to the 146 deaths led to landmark state regulations.

Businesses today, and their allies in Congress and the statehouses, are making the same arguments against government regulation that New York’s business leaders made a century ago. The current hue and cry about “burdensome government regulations” that stifle job growth shows that the lesson of the Triangle has been forgotten. Here, to refresh our fading memories, is what happened.

One hundred years ago, New York was a city of enormous wealth and wide disparities between rich and poor. New industries were booming—none more so than women’s and men’s clothing. The new age had created a demand for off-the-rack, mass-produced clothing that could be sold in department stores. The Triangle company made blouses, which were called shirtwaists.

Few of those who bought the new ready-to-wear clothing gave much thought to the people who made them. The blouses, skirts, and sweaters were sewn in miserable factories, often by girls as young as 15 who worked seven days a week, from 7 a.m. to 8 p.m. with a half-hour lunch break, and often longer during the busy season. They were paid about $6 per week, and were often required to use their own needles, thread, irons, and even sewing machines. The factories were overcrowded (they often occupied a room in a tenement apartment) and lacked ventilation. Many were poorly lit fire traps without sprinklers or fire escapes.

In November 1909, over 20,000 shirtwaist makers from more than 500 factories, led by the International Ladies Garment Workers Union (ILGWU), walked off their jobs. They demanded a 20 percent pay raise, a 52-hour workweek, and extra pay for overtime. They also called for adequate fire escapes and open doors from the factories to the street. Within 48 hours, more than 70 of the smaller factories agreed to the union’s demands, but many of the largest manufacturers refused to compromise. The New York City police soon began arresting strikers—labeling some of them “street walkers,” which was literally true, since they were carrying picket signs up and down the sidewalks. Judges fined them and sentenced some of the activists to labor camps.

But the strikers held out and by February 1910, most of the small and midsized factories, and some of the larger employers, had negotiated a settlement for higher pay and shorter hours. One of the companies that refused to settle was the Triangle Waist Company, one of New York’s largest garment makers.

That July, another group of garment workers—over 60,000 cloakmakers, mostly men this time—went on strike. As the tensions escalated, both union and business leaders invited prominent Boston attorney (and later Supreme Court Justice) Louis Brandeis to New York to help mediate the conflict. With Brandeis’s nudging, the two sides signed the “Protocol of Peace” agreement that set minimum industry standards on wages, hours, piece-rates, and workplace safety and health. But the Protocol’s weakness was that it was a voluntary agreement, not a government regulation, and not all manufacturers signed on. Once again, one of the holdouts was the Triangle Waist Company.

Owned by Isaac Harris and Max Blanck, who were known as the “the shirtwaist kings," Triangle was one of the most rabidly anti-union firms. On March 25, 1911, on a Saturday at 4:45 p.m., close to quitting time, a fire broke out on the eighth and ninth floors of its ten-story building. Factory foremen had locked the exit doors to keep out union organizers and to keep workers from taking breaks and stealing scraps of fabric. Other doors only opened inward and were blocked by the stampede of workers struggling to escape. The ladders of the city’s fire engines could not reach high enough to save the employees. As a result, workers burned or they jumped to their deaths. Experts later concluded that the fire was likely caused by a cigarette dropped on a pile of “cut aways” or scraps of cloth that had been accumulating for almost three months.

News of the fire spread quickly, catalyzing public opinion, and energizing a broad coalition of unlikely allies. It included immigrants, muckraking journalists, clergy, unionists, socialites, and socialists. Rose Schneiderman, an immigrant worker, socialist, and fiery union organizer, found common cause with Anne Morgan, the daughter of Wall Street chieftain J.P. Morgan. Frances Perkins, a former settlement house worker who was at the time a researcher and lobbyist for the Consumers League (and who later became Franklin Roosevelt’s trailblazing secretary of labor) joined hands with Rabbi Stephen S. Wise to demand reform.

On April 6, 30,000 New Yorkers marched—and hundreds of thousands more lined the march’s route—behind empty hearses to memorialize the fire’s victims. Numerous rallies, broadsides and editorials called for legislative action—ranging from fire safety codes to restrictions on child labor. In response to the outcry, New York Governor John Alden Dix created the Factory Investigating Commission, a pioneering body with broad subpoena powers and teams of investigators, led by two savvy Democratic politicians, state Assemblyman Al Smith and state Senator Robert F. Wagner.

Smith, Wagner, and the Commission members traveled up and down the state holding hearings and visiting factories. Over two years, the commissioners interviewed almost 500 witnesses and visited over 3,000 factories in 20 industries. They found buildings without fire escapes, bakeries in poorly ventilated cellars with rat droppings. Only 21 percent of the bakeries even had bathrooms, and most of them were unsanitary. Children—some as young as five years old—were toiling in dangerous canning factories. Women and girls were working 18-hour days.

After the fire, many city officials acknowledged there was a problem. Edward F. Croker, New York City’s retired fire chief, told the Commission that employers “pay absolutely no attention to the fire hazard or to the protection of the employees in these buildings. That is their last consideration.” His department had cited the Triangle building for lack of fire escapes just one week before the fire.

But the garment manufacturers, the Real Estate Board, and the bakery and cannery industry groups sought to stymie the Commission. The real-estate interests opposed city fire codes. After the Fire Department ordered warehouses to install sprinklers, the Protective League of Property Owners held a meeting to denounce the mandate, angrily charging the city with forcing owners to use “cumbersome and costly” equipment.

As representative of the Associated Industries of New York insisted that regulations would mean “the wiping out of industry in this state.” Mabel Clark, vice president of the W.N. Clark Company, a canning corporation, opposed any restrictions on child labor. “I have seen children working in factories, and I have seen them working at home, and they were perfectly happy,” she declared.

Terence McGuire, president of the Real Estate Board, summed up the business argument against regulation. “To my mind this is all wrong,” he declared. “The experience of the past proves conclusively that the best government is the least possible government.” The board warned that new laws would drive “manufacturers out of the City and State of New York.”

Smith, Wagner, and the political leaders of the time, fortified by a vibrant progressive movement, ignored these opponents of business regulation. In the first year, the Commission proposed and the legislature quickly passed a package of laws requiring mandatory fire drills, automatic sprinklers, and unlocked doors during work hours that were required to swing outward. They also created rules on the storage and disposal of flammable waste, and they banned smoking from the shop floor.

In the second year, the legislature passed additional reforms. They set the maximum numbers of workers per floor. They established codes requiring new buildings to include fireproof stairways and fire escapes. They required employers to provide clean drinking water, washrooms and toilets for their employees. They gave labor commission inspectors the power to shut down unsanitary tenement sweatshops. And they ruled that women could work no more than 54 hours a week and that children under 18 could not work in dangerous situations.

These pathbreaking state regulations, provoked by the Triangle fire, proved that government could play a powerful role in the lives of ordinary people. Other states followed suit, and ultimately President Franklin Roosevelt, prodded by Perkins, Wagner, and other veterans of New York’s progressive movement, introduced New Deal reforms ending child labor, establishing a federal minimum wage and a 40-hour week, and creating a National Labor Relations Board (NLRB) that would establish the right of workers to form a union that would bargain collectively with employers.

The Triangle company’s owners were indicted and went on trial for manslaughter, but they were found innocent when the judge told the jury that in order to return a guilty verdict, they had to find that the two defendants knew or should have known that the doors were locked. Harris and Blanck also continued to refuse to recognize the union. But the company never recovered from the fire and the controversy surrounding it, and in 1918, it closed its doors.

That didn’t happen to other city businesses. Contrary to the business leaders’ dire predictions, they did not suffer from the new regulations. The New York Times reported in July 1914, that, “[n]otwithstanding all the talk of a probable exodus of manufacturing interests, the commission has not found a single case of a manufacturer intending to leave the State because of the enforcement of the factory laws.” New York’s Seventh Avenue remained the headquarters of the nation’s garment industry for decades until production gradually moved south and overseas after World War II.

Ironically, 100 years after the Triangle fire, we still hear much of the same rhetoric whenever reformers seek to use government to businesses act more responsibly and protect consumers, workers, and the environment. For example, the disasters last year that killed 29 miners at Upper Big Branch and eleven oil rig workers in the Gulf could have been avoided had lawmakers resisted lobbying by mine owners and BP to weaken safety regulations.

Today, the leading foe of reform is the United States Chamber of Commerce, which is on a crusade against the Obama administration’s plans to set new rules on unsafe workplaces, industrial hazards and threats to public health. The Chamber labels every effort at reform a “job killer.” The Chamber’s most vocal proponent is Darrell Issa, the conservative California Republican who chairs the House Committee on Oversight and Government Reform. At the request of the Chamber and other industry lobbies, Issa recently launched a congressional assault on safeguards in workplaces and communities. 

In January, Issa sent letters to more than 170 companies and business lobby groups—including Duke Energy, FMC Corp., Toyota, Bayer, the American Petroleum Institute, the National Association of Manufacturers, the Association of American Railroads, the National Petrochemical & Refiners Association, and lobbies representing health care, banking, and telecommunication providers—asking them to identify "burdensome government regulations" that they want eliminated.

The business groups responded with a long wish list, including rules to control “combustible dust” that has resulted in explosions killing workers; rules to track musculoskelal disorders, such as tendonitis, carpal tunnel, or back injuries, that impact millions of workers at keyboards, in construction, or in meat processing; and rules to address workplace noise that leads to hearing loss. And Republicans listened. They are proposing to cut OSHA’s budget by 20 percent, which, coming on top of decades of cuts, would cripple an agency that has been effective at significantly reducing workplace injuries and deaths.

The Republican leadership is trying to drive home the message, in Speaker John Boehner’s words, that “excessive regulation costs jobs” and that the “path to prosperity” is by “getting government out of the way.” Americans of earlier generations—who enjoyed the benefits of the Progressive Era and the New Deal reforms, and the political clout of a vibrant labor movement—understood this was nonsense, but it seems like the lessons of the past have to be relearned again. That’s why it is important to recall the sordid circumstances in which 146 young women lost their lives at the Triangle Waist Company a century ago.

Peter Dreier

Peter Dreier is E.P. Clapp Distinguished Professor of Politics, and director of the Urban & Environmental Policy program, at Occidental College. His most recent book is The 100 Greatest Americans of the 20th Century: A Social Justice Hall of Fame (2012, Nation Books). Other books include: Place Matters: Metropolitics for the 21st Century and The Next Los Angeles: The Struggle for a Livable City. He writes regularly for the Los Angeles Times, The Nation, and American Prospect. 

Donald Cohen

Donald Cohen is currently the Director of the Cry Wolf Project and the Chair of In the Public Interest, a resource center on privatization and responsible contracting. A co-founder and former president of the Center on Policy Initiatives, a San Diego-based research, and policy center, Cohen has over 25 years of experience in campaigns and organizations dedicated to economic justice, healthcare reform, education reform, environmental protection, and international human rights.  He is also on the board of Green For All.

Americans’ Economic Prospects And Civil Liberties Have Been Stolen

Not only has your economy been stolen from you but also your civil liberties. My coauthor Lawrence Stratton and I provide the scary details of the entire story in The Tyranny of Good Intentions.

Is George Osborne Using The Red Briefcase As A Cat Litter Tray?

George Osborne may not have proved himself to be a dab hand at saving the economy - but, for an amateur, he's doing a lot better at Twitter. Someone must have told him Twitter was only good for cat pictures. The Chancellor has tweeted a picture of his...

Miliband Offers Answer To ‘Decade Of Decline’

Ed Miliband has accused David Cameron of condemning the UK to a "decade of decline" by sticking to austerity plans. In a speech this afternoon, the Labour leader insisted public anger with the coalition is growing in the wake of a no-change Budget - b...

Access to Health Care, Basic Necessities a Matter of Life or Debt

Examining the argument that “medical and other debt shouldn’t exist because debt is part of a rigged system of mafia capitalism that extracts wealth from people who are trying to meet their basic needs.”

This week the Strike Debt Rolling Jubilee, a project that arose from Occupy Wall Street, will announce its purchase of more than $1 million of medical debt as part of a weeklong national conversation about why people shouldn’t be put in debt meeting their basic needs.

Patient holding hands

(Image: Patient holding hands via Shutterstock)

The Rolling Jubilee raised funds to purchase bundles of debt for pennies on the dollar. Unlike the rapidly growing industry of collection agencies that purchase debt and then hound debtors until they repay, the Rolling Jubilee will erase their purchased debt, freeing debtors from their obligation. Rolling Jubilee members view debt as the intersection between Wall Street and people’s lives. They argue that medical and other debt shouldn’t exist because debt is part of a rigged system of mafia capitalism that extracts wealth from people who are trying to meet their basic needs.

We spoke with Thomas Gokey of Strike Debt and Dr. Steffie Woolhandler, co-founder of Physicians for a National Health Program and author of the leading studies on bankruptcy caused by medical debt, to learn more. We explored why medical debt exists in the United States, what its impacts are on health and what could be done to end medical debt completely. Woolhandler also described the impact of the 2006 Massachusetts’ health law, which was used as a blueprint for the national health law, on debt and health care costs. The solution, a national single-payer health system, described as “Expanded and Improved Medicare for All,” is already supported by the majority of Americans. Until this and other solutions to our crises are realized, Strike Debt provides a guide for organizing and resisting the culture of debt that binds us.

Living in the Land of Health Injustice

The US has used a market-based health system for so long that most people probably feel that it is normal, but in truth, the US health system is an aberration. Most industrialized nations have publicly-funded universal health care systems paid for through taxes that cover virtually 100 percent of necessary care. Their systems have been in existence for many decades, and while no system is perfect, other countries spend half what the United States  does per person on health care, cover everyone and have better health outcomes.

After World War II, the United States moved toward a system of health insurance primarily accessed through employment. Then, under President Reagan in the 1980s, there was an intentional effort to create investor-owned health-care services, turn health insurance into a profit-making sector and privatize the delivery of health care in for-profit hospitals. Creating a for-profit health care system is a thirty-year experiment with clear outcomes: uncontrolled costs, growing health disparities, falling life expectancy and other indicators of poor health status, including high numbers of preventable deaths. If such an experiment were to have been conducted by a research team, ethics would have demanded that the experiment be stopped a long time ago.

The basic flaws of the US system are obvious. When health insurance is tied to employment, the healthiest segment of the population (i.e. essentially those who are working) is covered. Those who cannot work, perhaps because of a serious accident or illness, lose their coverage or struggle to afford it on the individual market where the prices are higher and the coverage is skimpier. When the bottom line is profit, not health, health insurers compete to attract those who are healthy in the first place and then find ways to restrict and deny payment for care through provider networks, authorization processes and out-of-pocket costs.

Patients and providers spend so much time and energy trying to navigate the complicated health system in the United States that it is hard to see the forest for the trees. But each time that a patient delays or avoids necessary care, that a patient is asked what kind of insurance they have before they are asked what they need, or that a family has to choose between paying for treatment and paying for basics such as food and shelter, a health injustice has occurred. These scenarios do not happen in other wealthy nations.

In fact, medical debt and bankruptcy are uniquely American experiences among wealthy nations. Some enter into medical debt because they are uninsured and need medical services, but the majority of people who end up with medical bankruptcy have health insurance. Dr. Woolhandler and her colleagues interviewed over two thousand people in bankruptcy court. They found that more than 60 percent became bankrupt because of medical illness and medical bills, and nearly 80 percent had insurance when they first became ill. Despite being insured, the out-of-pocket costs for the premiums, copays, deductibles, co-insurance and uncovered services combined to create an unsustainable financial burden.

Woolhandler’s landmark bankruptcy study was based on data from 2007, before the financial crisis of 2008. At present, over one-third of working families have no savings, and nearly two-thirds do not have enough cash on hand to withstand a $1,000 emergency. When families are living paycheck to paycheck, one serious accident or illness is enough to push them over the edge.

In addition to the obvious risk of financial ruin, we asked Woolhandler about the impact of being uninsured or underinsured on health outcomes. The consequences are well-documented. People without insurance do not receive primary or preventive care, have worse outcomes when they do seek treatment and are more likely to die. The same goes for those who have skimpy health insurance. Copays and deductibles cause people to delay or avoid necessary care

ObamaCare Will Escalate Health Injustice

There is a lot of confusion about the Affordable Care Act (ACA). At its root the ACA was an insurance company takeover of health care in the United States which included lots of ways for health corporations to profit. There has been a marketing effort to sell people on the ACA by claiming more people will have health insurance, but what is not mentioned is that the type of insurance coverage people will have is going to be skimpier. While it is true that more people will have insurance, the ACA will still leave tens of millions without insurance when fully implemented, and there will be an increase in expensive under-insurance plans.

Prior to the passage of the Obama health reform, there were efforts by some state-level insurance regulators to require insurance companies to provide more extensive coverage by spending 80 to 85 percent of premiums on health services rather than on profit and administration. The Obama law stopped those efforts by putting in place a law for the first time which said that 60-40 plans are acceptable. In a 60-40 plan, the insurance company pays 60 percent of the covered costs, while the enrollee pays 40 percent plus the full amount of uncovered costs, those not included in their policies. Enrollee costs include premiums, deductibles, copays, co-insurance and other out-of-pocket expenses. It is these out-of-pocket costs that quickly lead to health-care debt and bankruptcy.

The ACA will push coverage in the direction of under-insurance in a number of ways. One is through taxing so-called “Cadillac Plans” which are merely insurance plans that provide the kind of coverage all Americans once viewed as standard – actual health insurance. Employers are planning to avoid the Cadillac tax by lowering benefits so that their plans do not meet the Cadillac Plan criteria. Employers are also planning to drop health benefits and pay a penalty instead, which saves money, or to drop health benefits and offer subsidies to employees to purchase health insurance on their own. Other employers are changing the status of their employees to be consultants or less than full time to avoid having to provide health benefits.

The ACA will result in more people purchasing inadequate insurance plans when the state insurance exchanges open later this year. There will be four tiers of coverage from 90-10 to 60-40 plans. Most people will be forced to choose the lower tiers because premiums will rise even higher when the requirement to offer policies to people with pre-existing conditions begins.

Those who qualify for subsidies by earning below 250 percent of the federal poverty level (the Federal Poverty Level income for a family of four is $23,550, the qualifying income, $58,875) will be allowed to purchase 70-30 plans only.

And the Obama administration narrowly interpreted the law so that qualification for subsidies based on the cost of premiums only applies to individual, not family, plans. This means that if the cost of an individual plan is less than 9.5 percent of a person’s income, even if that person actually needs a family plan which would cost more than 9.5 percent, they do not qualify for a subsidy to buy a family plan.

One way to know how the Obama law will fare is to look at the experience of the pilot project in Massachusetts. The 2006 Massachusetts health-care law cut the number of uninsured in half, which is similar to what the ACA is expected to accomplish. Those who are still without coverage are primarily the working poor. The health insurance exchange has not brought the cost of premiums down and is not used by the majority of the public. The exchange is mainly used by those who receive a subsidy from the government because subsidized plans must be purchased from the exchange. To pay for subsidies for insurance premiums, Massachusetts cut important safety net public health programs, especially programs like those for mental health services that are not covered by insurance. The cost of health care in Massachusetts, already the highest in the nation, continues to rise. And the cost of health care continues to be a barrier for people who need health services. Medical debt and bankruptcies continue at the same levels as before the law was passed.

Based on predictions by groups like the Congressional Budget Office and the experience in Massachusetts, we can predict the result of the ACA: continued lack of insurance for at least 30 million, more people in the costly individual insurance market, more people with under-insurance, continued increases in the cost of health care, continued financial barriers to necessary health care and continued high levels of medical debt and medical bankruptcy. In other words, health injustice will continue in the United States.

How to End Health Injustice

One of the first steps required for change is awareness of the problem. The Strike Debt Rolling Jubilee “Life or Debt” campaign will help some people directly, but it will do more to highlight the ongoing problems of medical debt and the debtor system. The Rolling Jubilee has joined with single-payer health care advocates for a week of national solidarity actions to educate about the single-payer solution and to shift the broader conversation to one that questions a system that profits from people’s attempts to meet their needs.

The dominant message in the United States is one that places the blame on individuals when they are unable to meet their basic needs for health care, housing, education and food. The individual is blamed for making a bad decision to borrow money or for not being able to put money aside in a savings account. This is meant to make people feel shame. It is a form of social control that disempowers people and silences them. But Strike Debt recognizes that 76 percent of Americans are in debt and asks, “How is it possible that three-quarters of us could all have just somehow failed to figure out how to properly manage our money, all at the same time?”

This is a fundamental question because real transformation becomes possible when people stop feeling isolated and ashamed and instead join together to tell their stories, to find connections between their stories and to question the root causes of their shared situation. For us, this was a key reason for the physical occupations in the fall of 2011. In the occupations, people met others who were struggling with the same problems of homelessness, unemployment and debt. The Strike Debt campaign says it well, “You are not a loan. You are not alone.” Working in solidarity is both empowering and powerful.

For too long in the United States, politicians and the corporate media have defined the narrative. We can use single payer as a prime example. A single-payer health-care system or “improved Medicare-for-All” would ensure access to health care from birth to death for everyone in the United States. This is eminently affordable, indeed the US already spends the most per person on health care in the world; we just get the least return for our spending. It is not a question of the cost; rather it is a question of the US political system being able to put in place real solutions despite the power of the insurance and for-profit health-care industries.

The arguments for single payer are widely supported and well-known. It is the only proven path to a national health system that will provide coverage to everyone in the United States, control costs and produce excellent health outcomes. There is a solid majority of the public, including a majority of health professionals, who supports a single-payer health system despite the intentional misinformation campaign that characterizes single payer as “socialism” and “rationing.” But single-payer supporters are disempowered by being told that they are asking for too much and that what they want is not politically feasible. They are urged to be pragmatic and to accept incremental solutions.

Tens of millions of dollars have been invested in front groups such as Health Care for America Now to channel popular energy away from single payer and into Wall Street solutions such as the ACA. And it has been very effective. During the health-reform process, the groups who supported health reform were effectively split. Single-payer supporters were divided into those who held firm for a single payer plan and those who supported what was called the public option. Single-payer supporters who held firm were chastised for not being pragmatic and supporting a public option, which was mislabeled as a step toward single payer even though the evidence showed that a public option was neither a practical step nor was it intended to be included in the health law.

As the health law neared the final steps in the process, and the provisions in the bill were increasingly unacceptable, two additional methods of social control were employed. One was straight up lying. Politicians and their front groups called the health law “universal, affordable and guaranteed,” when it was none of those. And the other was to tie the success of the law to the success of the Democratic Party and to frighten the public into believing that Republicans would be much worse. This line of thinking ignored the fact that the state model for the bill was passed under a Republican administration, Governor Romney, in Massachusetts, and that the blueprint for the bill was developed in the conservative Heritage Foundation.

There are important lessons to learn from the health-reform process. First, is that advocates must have a solid understanding of what constitutes a real solution so they are not led down a path toward a false solution. Second, is that advocates must work in solidarity for real solutions with confidence rather than accepting watered-down solutions. And third, is that advocates must not tether their work to the agenda of any political party but must be willing to hold whoever is in office accountable.

Commodifying Human Needs Violates Human Rights

The human rights framework is being used more and more as a way to understand problems and their solutions and to empower people to demand that basic needs are met. The concept of human rights runs counter to the incentive of the market, which is to make everything a commodity. When human needs are treated as commodities, those who control access to them have a captive population.

Like the company towns that arose during the Industrial Revolution, Wall Street controls the currency, the jobs, and goods and services, so that many people have nowhere to go. It is estimated by author John Curl that 92 percent of the working population in the US is trapped in indentured servitude, dependent on their job for their survival. As anthropologist David Graeber points out, the earliest wage contracts were slave rentals. Today, the reality for almost all Americans is living as indebted wage slaves.

One of the tools used by dictatorships to control their populations and prevent uprisings is to impose economic sanctions. Sanctions are easy to recognize when we look at other nations, but not so easy to see at home. The United States is the wealthiest nation in the world, and total wealth is growing. But this wealth, much of which is derived from the resources and labor of the population, is flowing to the top 1 percent or above, while the wealth of the bottom 99 percent is falling. There is enough wealth in the United States to provide free education and health care to all and to create a full employment program. The US could invest in a clean energy infrastructure and affordable housing. The failure to do so is equivalent to imposing sanctions on the majority of the people.

Although some do not know it yet, all people in the United States are united by their human rights to have basic needs met. Indeed, the United States has signed onto two international treaties that delineate these human rights. One is the Universal Declaration of Human Rights and the other is the International Covenant on Economic, Social, and Cultural Rights. These rights, including our right to health care, are being violated. It is up to the people to realize this and to join together in demanding that our rights be honored. Human rights are the glue that binds us to each other. Debt is the shackle that enslaves us to Wall Street.

Starting at the Roots

The commodification of health care is the root cause of medical debt and bankruptcy, but we see the same pattern when it comes to other essentials such as housing, education and more. The Strike Debt campaign on medical debt is part of a broader campaign against our debt-based economy. Debt has been part of human society for thousands of years and, as David Graeber notes, there are “potentially catastrophic social consequences of debt.” In order to avoid a debt crisis:

“It soon became traditional for each new ruler to wipe the slate clean, cancel all debts, and declare a general amnesty or ‘freedom’, so that all bonded labourers could return to their families. (It is significant here that the first word for ‘freedom’ known in any human language, the Sumerian amarga, literally means ‘return to mother’.) Biblical prophets instituted a similar custom, the Jubilee, whereby after seven years all debts were similarly cancelled. This is the direct ancestor of the New Testament notion of ‘redemption.’ ”

Strike Debt seeks to “build popular resistance to all forms of debt imposed on us by the banks. Debt keeps us isolated, ashamed and afraid. We are building a movement to challenge this system while creating alternatives and supporting each other. We want an economy where our debts are to our friends, families and communities – and not to the 1%.”

This type of thinking is fundamental to achieving a society based on equality, prosperity and human rights. A culture shift away from the dominant narrative of the marketplace to one of social solidarity is essential because a population that is empowered and works together is more difficult to oppress and control.

The Strike Debt campaign prepared a Debt Resisters Organizing Manual to provide people with tools to both resist debt and build the society we want to live in. The manual is an ongoing work that is available for free on the Strike Debt website. It explains debt and how it is created. It provides specific actions that people can take to decrease their individual debt. And it provides information so that communities can understand ways that debt controls their collective lives, for example when public debt is used to justify cuts to social services and basic public infrastructure.

Debt is a global problem. It is a tool that has been used for decades to advance a neoliberal agenda of privatization of goods and services. Secretary of State John Kerry’s first trip to Egypt was to push their new government to accept an International Monetary Fund (IMF) loan with the requirement that it end subsidies for fuel and food, among other structural adjustments. The United States, through the World Bank and IMF, routinely requires Structural Adjustment Programs as conditions of loans that demand decreased funding for public programs and increased foreign ownership of resources.

Indeed, rather than ending debt as wise rulers of the past have done, for the first time in the 5,000-year history of debt, Graeber writes, “we have begun to see the creation of the first effective planetary administrative system, operating through the IMF, World Bank, corporations and other financial institutions, largely in order to protect the interests of creditors.”

But more civil societies are taking a stand against debt that has been imposed upon them without their consent. In Spain, this is being done through the “No Pagamos” (We Won’t Pay) campaign. Likewise, it is happening in the UK and Greece. We have written previously about successes in Latin America such as Venezuela and Ecuador.

As neoliberal policies take root at home, more communities in the US are building Strike Debt chapters and fighting back. To find a chapter near you or to start one, visit Strike Debt. It is time for Americans to stand together, with the people of the world, and end the systemic problem of debt enslavement. For this, our solidarity is more important than ever.

You can listen to our interview with Thomas Gokey of Strike Debt and Dr. Steffie Woolhandler of PNHP.org on Medical Debt and Bankruptcy on Clearing the FOG.Margaret Flowers and Kevin Zeese

Kevin Zeese JD and Margaret Flowers MD co-host ClearingtheFOGRadio.org on We Act Radio 1480 AM Washington, DC and on Economic Democracy Media, co-direct It’s Our Economy and are organizers of the Occupation of Washington, DC. Their twitters are @KBZeese and @MFlowers8.

Could New York Be the Next Chicago?

Last September’s Chicago teachers strike, organized—and won—by an unapologetically democratic, community-centered union, gave hope to laborites across the country that there could be a functional American labor movement.

Now, a caucus of unionists seeks to remake New York’s United Federation of Teachers, the city’s local of the American Federation of Teachers, in the CTU’s mold. The Movement of Rank-and-File Educators (MORE) was founded last spring as an alliance of teacher caucuses and activist groups. The caucus stands unconditionally opposed to school closingsretributive punishment of students, and the “junk science” of evaluating teachers based on student tests. “Teachers need to play the role in laying a platform for parents and students,” says Marissa Torres, MORE’s candidate for assistant treasurer in next month’s elections. Torres calls for the UFT, like the Chicago Teachers Union, to foreground explicit anti-racism and collective struggle.

MORE’S sharpest point of departure from current leadership is over union governance. It demands elections for district representatives, which became appointed positions in 2003 under then-president Randi Weingarten (now the head of the AFT). As a caucus that counts parents among its members, it also advocates parent representation on the union’s executive board.

Unlike Chicago’s governing Caucus of Rank-and-File Educators (CORE), though, MORE faces safely ensconced union leadership. The Unity Caucus has been in power ever since the union’s founding in 1960. Former UFT member Lois Weiner argues in her recent book, The Future of Our Schools: Teachers Unions and Social Justice, that Unity’s unchecked reign has ossified the union. “The UFT has indeed been able to protect many of the vestiges of the old system by calling in its political chops,” she writes, but “has done so at the expense of alienating its natural allies, insulating the bureaucracy and allowing the union to all but disappear at the school.” At a February panel organized by MORE, Weiner cautioned caucus members not to focus only on capturing union leadership, but to reinvent the union through organizing, inside and out.

With union elections coming up and a fight with the city over teacher evaluation still raging, MORE has a host of opportunities to build support for its alternative model of teacher unionism.

Bloomberg-style elections

This spring’s UFT elections are unlikely to propel MORE into union leadership, but will serve as a test of its ground game. Elections are a time for “accountability, conversation, outreach, relationship building,” says Julie Cavanagh, MORE’s candidate for union president. Describing the union culture that MORE is trying to create, she says, “Spaces would exist for discourse, dialogue, and analysis. Questions could be asked and answered. A vision for the next three years would be presented and collectively discussed.”

To this end, MORE has used the elections as a launching pad for member-to-member outreach. Teachers have held countless regional forums and meet-ups to build a network of chapter leaders and members and organize at school sites. The caucus also maintains an active online presence and, like its counterparts in Chicago, hosts a reading group (covering Weiner’s book, among others). 

Although the UFT has a long history of dissident caucuses, none have been able to unseat Unity leadership—thanks in part to the union’s heavy incumbent bias. Of the 90 members on its executive board, only 23 are elected exclusively by teachers from particular strata—elementary, middle and high school. The rest of the board—19 “functionals” (non-teaching staff) and 48 at-large positions—are, like the 12-person leadership slate, voted on by workers and retirees alike. The retiree vote puts non-incumbents in a fix: Although challenger caucuses like MORE can access every teacher’s mailbox and buy a chapter leader list for mailings, they have no way of directly reaching out to retirees.

“Unity has been the only game in town,” says one retiree who taught high school social studies in Brooklyn for 24 years and agreed to speak on condition of anonymity. Though he expressed disappointment with union leadership over its handling of laid off teachers and its inability to roll back the mayor’s yearly tide of school closings—which included his own—he hasn’t heard from MORE and retains de facto Unity membership.

Compromise to the top?

Meanwhile, labor-management negotiations have become a theater of contention between MORE and Unity over how assertive—and how democratic—the union should be.

Last year, the Unity leadership decided to sign onto the city’s application for $40 million in federal Race to the Top funds, drawing criticism from MORE. Cavanagh slammed the leadership for accepting a greater role for standardized tests in teacher evaluations—a precondition for Race to the Top funding—in exchange for online learning grants with unproven benefits. “We should take a look at what we know works,” she said, “and not spend millions of dollars on experiments on other people’s children.”

New York City ultimately lost its Race to the Top bid for declining to provide requested information about its budget.

In response to MORE’s criticisms, Leo Casey, co-chair of the UFT’s evaluation negotiation committee, stressed the importance of finding common ground with the city. “The union’s position was that we needed to engage,” he said in an interview with Working In These Times, “and we needed to get the best possible evaluation system for our members that we could.”

Casey dismissed those opposed to the Unity leadership as “in the thrall of the apolitical romance of ‘revolutionary virtue’” and of the belief that “it is better to die gloriously on the field of battle protecting one’s virtue than to live to fight another day.” He accused dissidents of ignoring “the balance of power and of different forces” and using “rank-and-file empowerment and mobilization” as “the answer to every question.”

Who negotiates?

MORE’s emphasis on “empowerment and mobilization” has been evident in the union’s ongoing battle with the Bloomberg administration over a new evaluation system. Governor Andrew Cuomo demanded last spring that all districts negotiate new formulas for rating teachers by January 17, 2013, or risk hundreds of millions in sanctions. MORE maneuvered to involve rank-and-filers in the negotiations, gathering some 1,000 signatures on a petition calling for a member-wide referendum on all extra-contractual agreements. The UFT’s December 12 Delegate Assembly, however, dominated by the governing Unity Caucus, overwhelmingly voted down the proposal.

Negotiations between the union and the city on the new evaluation system fell through at the eleventh hour—which the union (and an unusually sympathetic New York Times) laid at the feet of the administration. While parent advocates won a legal battle to recoup the $250 million in punishment levied by the state, if no deal is reached by May 29, negotiations fall in the hands of a dubiously impartial arbitrator—state education commissioner John King.

The union leadership issued a statement expressing general approval of the arbitration process: “We’ve seen the kinds of plans the state has approved and we are comfortable with them because they are about helping teachers help kids.” MORE responds, “Any responsible union, led by people who care about the status of their members, would seek only a fair and independent arbitration process.”

As evidence of a current lack of democracy in negotiations, those clamoring for a new unionism cite emails such as one sent by a district representative to chapter leaders after a meeting in January. “It is not the place nor the time to get on a soapbox and speak about what you want to speak about,” the email reads. “We present the information, not to be filtered by you or to be changed in any way, it is to be presented to your members as you have heard it from me or any of the leadership in this union.”

The same day that email was sent, the union was criticized for being antidemocratic by a very different dissenter: Mayor Bloomberg. Responding to a union television ad blasting him for injecting dirty politics into evaluation negotiations, he compared it to the National Rifle Association, “another place where the membership, if you do the polling, doesn’t agree with the leadership.”

The union issued a stern rebuke—and the progressive media joined the uproar. But how the union can prevail in negotiations and defeat Bloomberg-allied forces in the long term is less obvious. Reacting to the Chicago teachers strike, UFT President Michael Mulgrew said, “The lesson for us here in New York is simple: Our ability to push back those so-called ‘reformers’ with their anti-teacher agenda depends in large measure on electing local and state representatives who understand and appreciate the importance of the work that we do every day in the classroom.”

The union is hopeful that Bloomberg’s successor, elected this year, will be more labor-friendly. By contrast, MORE’s approach is to take Bloomberg’s statement on the UFT’s member-leader rift and run with it—“occupying the union,” as Weiner’s book advocates, by elevating the voices of rank-and-filers and pushing for a CTU-style leadership that leverages these voices for political power.

UBS’ George Magnus Asks “Why Are The European Streets Relatively Quiet?”

The wave of social unrest that rumbled across Europe between 2008 and 2011 has become less intense. This has come as a cause for relief in financial markets, as it has helped to underpin the marginalization of ‘tail risk’ already addressed by the ECB and the Greek debt restructuring. And yet the latest crisis over the Cyprus bail-out/bail-in not only shoots an arrow into the heart of the principles of an acceptable banking union arrangement, if it could ever be agreed, but also signifies the deep malaise in the complex and fragile trust relationships between European citizens and their governments and institutions. Some people argue that protest, nationalist and separatist movements are just ‘noise’, that the business of ‘fixing Europe’ is proceeding regardless, and that citizens are resigned to the pain of keeping the Euro system together. UBS' George Magnus is not convinced, even if public anger is less acute now than in the past, it is far from dormant, and its expression is mostly unpredictable. So is the current lull in social unrest a signal that the social fabric of Europe is more robust than we thought, or (as we suggested 14 months ago) is the calm deceptive?

Social unrest is a systemic phenomenon, which, according to an OECD report, meets two principal criteria. It is highly uncertain, complex and ambiguous; and it is highly likely to generate ripple effects into other sectors of the economy and society, possibly leading to the toppling of governments, or even political systems. Although European social unrest since the crisis in Greece began has claimed a small number of fatalities and considerable damage to property, it has been notable more for the public expression of lack of trust in the institutions of government, including in Brussels. If a rising number of people give up on the willingness and ability of their institutions to address grievances, then the lull is most likely deceptive.

We have been here before. The economic and political context of the 1930s was, of course, different. Then there was much historical and unresolved geo-political baggage, and a rupture of the political centre as two radically different ideological veins erupted from the backlash against free trade and the gold standard. One championed radical social reform, the other what may be euphemistically called ‘nation-building’ 5 . And there was no EU. But the problem today, as then, is the same, namely the inadequacy of mainstream, political channels to address rising public concern about the loss of economic security, social stability and, yes, cultural identity6. How else to explain both the rise of Spain’s indignados, and other similar national protest movements in Europe, and the increase in nationalist, populist and separatist sentiment, and representation in national parliaments from Greece, France, and Spain to Finland and the Netherlands, and now Italy?

...

Still an austerity zone

Even though the financial crisis in Europe has faded, for the time being at least, the economic stress nurturing protest movements hasn’t. The best that can be said is that the incidence of austerity may not be as significant as it was in 2010-11

...

Backlash link to austerity

Let’s assume nothing changes, and that while European elites debate how – or if – they can build strong European banking, fiscal and economic institutions, with the required transfer mechanisms between creditors and debtors, the economic lot of European citizens, an unhappy one for five years now, shows no improvement. This seems a decent assumption.

...

The principal economic lesson is that an austerity regime with recurring reductions in public outlays won’t work a) when the private sector is trying to delever and shrink liabilities at the same time b) when it is a generic phenomenon and c) when its principal impact is to depress the level of money GDP and sustain the economy in a liquidity trap. But thanks to some interesting empirical work, another lesson concerns the corrosive and dangerous effects of large and sustained austerity in creating a social backlash that results in greater uncertainty, and therefore inertia, when it comes to corporate hiring and capital spending. As a result, output and public sector tax revenues suffer, reinforcing the negative dynamic between debt and the economy.

...

when expenditure cuts, specifically, rise to more than 2% of GDP, and particularly when they rise towards or over 5% of GDP, the number and the severity of incidents of unrest rise sharply.

...

Self-evidently, there have been heightened levels of social unrest and shocks to the political system in Greece, Spain, Portugal and Italy, but not in the UK or Ireland, or in the US, for that matter, though neither the US nor the UK, for example, have been immune to social unrest, sometimes requiring the force of the state to suppress it.12. But the main difference between many incidents of social unrest and the ones that damage the social fabric and the economic environment is the impact (sometimes more perceived than real, perhaps) of highly restrictive budgetary measures. Some governments may be better able to implement and absorb them, and sustain the trust or belief in citizens in perseverance. Mostly, this comes down to the robustness of local institutions, and the performance of leaders, as well as culture and history.

The most fundamental manifestation of this damage is, of course, unemployment. But this is only the most visible sign of the upheaval in Europe’s famed social model, and overlooks other important social and economic fault lines, including stagnant or declining real wages, rising income inequality, levels of youth unemployment of between 25% and 50%, and the rise in the numbers of long-term unemployed.

These phenomena didn’t begin with the financial and Euro crises, of course, but they have certainly been exacerbated by it and by the response of governments, and citizens are certainly making the connection, regardless.

So why are the streets relatively quiet?

The short answer is we don’t know. None of the reasons we can think of add up to much, but judge for yourself. It could have something to do with Europe’s rapid ageing demographic transition. The proportion of young adults, aged 15-24 has already been falling from peak levels seen in the mid 1980s, and is on track to decline further in the next 20 years. The proportion of 15-59 year olds, or what we might imagine as the part of the population most likely to express non-voting anger, is peaking now, but a significant decline is predicted. Perhaps the baby boomers have expended their protest energy!

Rapid growth in, and a rising proportion of, the numbers of young people, say aged 15-29, certainly feed the potential for social protest and upheaval. But they also need a catalyst, which could be the emergence of high inflation.

Empirically, there is an unequivocal association, but this is best applied, in contemporary times at least, to the experience of emerging and developing countries, for example, as in the Arab Spring. Although the European upheavals in the 1960s and 1970s were set against a backdrop of rising inflation, those in the 1930s and today are the product of depression and awkward questions of self-determination, not inflation.

Perhaps the relative calm in Europe has something to do with European family structures. The Bank Credit Analyst recently published a chart, emphasizing the role of the family as a shock absorber. The authors suggest that the countries with the highest youth unemployment rates are also those with the highest proportion of young adults living with their parents, who fulfill the role of effecting transfers and economic and social support.

We are not sure about this one either, although having an extended family structure on which to rely is clearly a mitigating factor against poverty and social exclusion. But the two variables may simply be spuriously correlated since both represent symptoms of a depressed economy. In any event, those countries with the highest youth unemployment and numbers living at home have already claimed the bragging rights for anti-austerity protest, while six of the other eight countries have been characterized by fallen or weakened governments, and the rise of nationalist and anti-immigrant political parties and policies.

A conclusion to this discussion is not possible.

In a benign outcome, the potential for social disorder will be defused by a new approach to economic burden-sharing, a re-sequencing of the pursuit of austerity and growth objectives, and steady progress towards the establishment of credible and trusted European banking, economic and political institutions, including financial transfer mechanisms. Motherhood, to be sure, and this has at least two vital caveats, namely the willingness of Germany and other northern European countries to accept significant sovereignty compromises, and the implications for the EU project, if this level of integration proves a bridge too far for UK voters in the promised 2017 referendum.

Social and political upheavals would doubtless haunt the worst-case outcome, where muddling through leads nevertheless to a fragmentation of the Eurozone, or, in extremis, a collapse, in spite of OMTs and the like. The possible consequences, including for the social fabric of Europe, have been well aired in the last couple of years.

The middle way, so to speak, is a muddling through that never scales the successful outcome hurdles, but carries on regardless. Political bonds, maybe fear, sustain the Euro system, but European leaders are unable to reach an agreed and acceptable framework for durable economic recovery and full integration. This outcome describes the status quo, and is the base case for most people. But it is also about stagnant, low growth, persistent high unemployment, retreating targets for debt sustainability, more bail-outs and bail-ins, latent financial instability, and likely sovereign default. The current Eurozone news could not be more apt, and doesn’t seem like the ideal scenario in which to expect European social unrest and political turbulence to fade away.

On the News With Thom Hartmann: Walmart Is Illegally Targeting Employees That Protested During...

In today's On the News segment: There is a new effort in Washington to loosen Wall Street regulations and water down the 2010 Dodd Frank Act is getting bipartisan support in Congress; Walmart is illegally targeting employees that took part in the Black Friday protests last year; Culinary workers in Las Vegas are standing up to Casino owners with acts of civil disobedience; and more.

Thom Hartmann here – on the news… 

You need to know this. Despite gridlock in Washington, a new effort to loosen Wall Street regulations and water down the 2010 Dodd Frank Act is getting bipartisan support in Congress.  Republican Representatives Patrick Henry and Scott Garrett are backing the measure, as is Democratic Rep. Gwen Moore.  Moore justified her support by saying the plan is only meant to relieve regulatory burdens on companies that do business with big banks.  Another democrat, Representative Jim Himes, even wants to roll-back Dodd Frank, and stick taxpayers with the bill, should the derivative market implode again.  But some Democrats still understand the dangers of banks-gone-wild, and are fighting for tougher regulations to protect us all.  Less than a week ago, Senator Carl Levin issued a scathing report on the devastation JP Morgan caused with risky multibillion-dollar derivative trades.  Levin said, “It is incredible that less than a week after new JPMorgan Whale hearings detailed how the bank's London office piled up risk, hid losses, and dodged regulatory oversight, that some House members are again supporting the weakening of derivative safegaurds.”  It's only been five years since the banksters crashed our economy by gambling with derivatives, and the modest legislation we've enacted is meant to prevent another economic meltdown.  Representative Alan Grayson, a leading voice for financial reform, criticized his colleagues for considering putting our nation at risk again. He said, “the road to hell is paved with these bills.”  We should be strengthening regulations on Wall Street, not giving banksters another free pass to gamble with our economic future.  Call Congress today and tell them they must stop the next derivatives debacle before it's too late. 

In screwed news... On Black Friday last year, Walmart employees made national headlines by staging a walkout to protest low-wages, unsafe working conditions, and anti-union management practices.  And now it appears the mega-retailer is illegally targeting employees that took part in the protest.  According to a new report by The Nation, The National Labor Relations Board has issued a complaint alleging that four companies, which are involved in staffing and managing Walmart's largest distribution center, have repeatedly threatened and punished warehouse workers for taking part in union activities.  The allegations include canceling employee breaks, increasing work hours, telling workers they are under surveillance, and even terminating six individuals for participating in pro-union activites.  As the NLRB was weakened by a recent Supreme Court ruling, that agency has been slow to process complaints and dole out punishments for Walmart's illegal practices. One employee told The Nation, “they're not terribly afraid to break labor law, because there's not really a penalty for doing so.”  Because Republicans continue to block agency nominations – effectively neutering the NLRB, Walmart workers shouldn't expect the agency to provide more help any time soon.  But employees have a legal right to demand higher wages and better working conditions, and they must not give up on this important fight.

In the best of the rest of the news... 

Culinary workers in Las Vegas are standing up to Casino owners with acts of civil disobedience.  Ninety-eight protestors were arrested yesterday for blocking traffic during a protest outside of the Cosmopolitan Hotel and Casino.  The workers have been in contract negotiations with casino management for about two years, demanding an agreement that outlines wages, benefits, and job security.  According to the Associated Press, the two-year-old casino is one of only a few in Las Vegas that is not unionized, despite the majority of workers saying they want representation. As protestors blocked the streets for about an hour, they chanted, “If we don't get no contract, you don't get no peace.”  Representatives of Deutsche Bank, that owns the casino, said they are stalling because they intend to sell the resort, and don't want to be burdened with a union contract. Any sale worth making, and any casino worth buying, can afford to pay it's workers a living wage.  Perhaps they should consider that it will be even more difficult to sell the casino if they can't get employees to work there.  Unions are under attack throughout our nation, and this is one more battle in the fight to preserve collective bargaining. We'll have to wait and see how this turns out. Stay tuned. 

In June of last year, Barclays Bank in the UK was fined 290 million Euros for it's role in the international Libor rate-rigging scandal.  So, it stands to reason that the bank executives don't deserve a reward for their actions... but yesterday, that's exactly what they got.  According to The Guardian, Barclays attempted to “bury” the news of bankster bonuses by announcing it the same day much of the city was distracted with news on a city budget.  But, reports of the 38.5 million euro payouts did not go unnoticed. The bank did not respond to claims it tried to bury the news of massive bonuses, but a person close to the company said the announcement date was selected back in December. John Hunter, of the UK Shareholder Association, said “society's first reaction is that bankers are a bunch of sleazeballs, and this makes them look even sleazier.”  It's bad enough that banksters are getting rewarded for lying and manipulating the financial markets, but it's even worse that they think no one will notice.  

And finally…  Talk about a return on investment. Reuters reports that an unnamed New York family bought a $3 dollar bowl at a yard sale, and they just sold the 1,000 year-old Chinese artifact at auction for $2.25 million dollars.  Apparently the family had the bowl displayed on a mantlepiece, and only learned of it's value after speaking with experts.  A Sotheby's representative said the piece is almost identical to one that's been featured in the British Museum for over 60 years.  So, next time you consider getting rid of a few things around the house, you may want to look a little more carefully at what you sell. One man's trash in another man's treasure.  And in this case, that treasure happened to be worth over $2 million dollars. 

And that’s the way it is today – Thursday, March 21, 2013. I’m Thom Hartmann – on the news. 

Norman Lamont: Cutting Spending Does Hit Growth

One of the chancellor's closest allies has said that George Osborne "should stick to the strategy" of deficit reduction, despite admitting that "no one can argue" austerity measures have had an "effect" on "meagre" economic growth in the UK. Reacting ...

Norman Lamont: Cutting Spending Does Hit Growth

One of the chancellor's closest allies has said that George Osborne "should stick to the strategy" of deficit reduction, despite admitting that austerity measures have had an "effect" on "meagre" economic growth in the UK. Reacting to Wednesday's Budg...

Britain’s growth halved, Osborne turns to Bank of England for help

By William Schomberg and David Milliken LONDON (Reuters) - Chancellor George Osborne turned to the Bank of England on Wednesday to do more to help spur the country's stagnant economy as he announced a halving of this year's growth forecast. In an annu...

Greece: The Crisis Behind the Crisis and the Challenges Facing the Left

Neoliberal policies created a disaster in the country now shredded by austerity measures. The Syriza party and the Greek left have much work ahead if they are to build a just and sustainable economic and social order.

When the global financial crisis of 2008 reached Europe's shores sometime in late 2009, the eurozone, with its faulty design and distinct neoliberal policymaking framework, experienced its first major crisis since the introduction of the euro as a single currency; the danger of an imminent collapse was suddenly all too real. From the beginning, there were warnings about the dire consequences of introducing a single currency into a region with sharp economic and cultural differences, but the European political elite turned a deaf ear on the skeptics.(1) European business interests were too big to be compromised over concerns about future financial busts or speculations about the risk of adopting a foreign currency without the backing of a federal treasury and a central bank acting as lender of last resort. Indeed, like the owner of the Titanic who told the captain to go full speed although several warnings had been received about icebergs ahead, European policymakers at the time could not resist the temptation to launch euro as a cash currency in spite of the fact that the Eurosystem was built on a weak institutional foundation. And they compounded the error by allowing highly problematic candidates to join the union, thereby violating the principles of optimal currency areas.(2)

Unfit to Join the Euro

The first crack in the EU wall occurred in Greece, the weakest link of the currency union. Economically, socially and culturally, Greece was ill prepared to join the euro when it did back in 2001, but the country managed nevertheless to do so mainly because of its legacy of contribution to the development of Western culture.(3) The nation's domestic political and economic elite were eager to join Euroland not just because of the perceived benefits, but also because they were very much in need of a psychological boost: if you are weak and marginal, and incapable of change and improvement, joining a group of strong and rich nations gives you the illusion that you are on a par with them.(4) Hence the hilarious statement of then Greek Finance Minister, Yannos Papantoniou, who described the joining of the euro as "'an historic day that would place Greece firmly at the heart of Europe,"' or the equally laughable statement of then prime minister Costas Simitis, who propounded that "we all know that our inclusion in EMU (European Monetary Union) ensures for us greater stability and opens up new horizons."

Apparently, both of these political midgets felt that what shapes a nation's economy is its currency, not its productive base, technological know-how, human skills, etcetera. Be that as it may, the euro produced, for the most part, a rocky ride for Greece (GDP increased, but both public and private debt levels reached new heights while competitiveness declined significantly) that ten years later crashed against the brick wall erected by international credit markets when they refused to extend further lending on account of the country's massive fiscal deficit and humongous public debt burden. And perhaps not without coincidence, both of the aforementioned euro cheerleaders ended up having reigned over the longest unbroken period of political corruption in the modern period of Greece, courtesy of neoliberal "socialist" governance.(5)

When the global financial crisis erupted, the Greek economy had already entered a downturn phase, with GDP expansion having slowed down in 2008. The industrial sector, in fact, had entered a phase of recession as far back as 2005. In 2008, the industrial production indicator had fallen by 4.2 percent and reached a 10 percent decline in 2009.(6) Yet, when the crisis initially reached Greece, everyone was in an apparent and inexplicable state of denial, including leading EU officials. Thus, in October 2008, Kostas Karamanlis, then Greece's prime minister and leader of the conservative New Democracy party, declared in a speech to his cadres that the Greek economy was largely "shielded" from the effects of the economic crisis thanks to the structural adjustments his government had initiated. And his main political opponent, PASOK leader George Papandreou and current prime minister, assured the citizenry that "there was plenty of money around" and that, if elected, his government would exhibit "'the political will"' to find money for the toiling population, just as it had been found for the bailouts of the banks. But the most problematic example of unwillingness on the part of leading public officials to recognize the trouble that lay ahead for Greece came from the EU chiefs themselves: thus, EU Commissioner Joaquín Almunia announced as late as February 2009 that "the Greek economy is in better condition compared with the average condition in the Eurozone, which is currently in recession."(7)

Why were the Greek and EU political elites unable and unwilling to face up to the gravity of the Greek situation before things got out of hand? This question remains vital as the Greek economic crisis is now turning into a humanitarian crisis and EU leaders continue to ignore the pressing reality of the situation, intent on pushing forward with the destructive policies of austerity and fiscal adjustment.

But Greece's sovereign debt crisis did not come out of the blue. It may have been precipitated by the financial global crisis of September-October 2008 (the deficit had climbed to 15.4 percent of GDP, although there are accusations made from a former employee of the Greek Statistical Authority, Zoe Georganta, a professor of economics at the University of Macedonia, that the official figures for the 2009 budget deficit had been inflated by the Papandreou government in 2010 in an apparent attempt to legitimize the harsh austerity measures that came along with the bailout plan orchestrated by the European Union and the International Monetary Fund (IMF); an inquiry is now underway by Greek prosecutors). But it had long been in the making. It was, in effect, a time bomb waiting to explode. The Greek economic model of growth was highly flawed: growth was not based on economic fundamentals; income tax rates were always very low, tax evasion massive, and Greek governments ran a continual deficit - building up an immense stock of national debt consistently well over 100 percent of GDP.

The Triple Nature of the Greek Crisis

Still, the Greek crisis must be seen as something much more than the simple outcome of corrupt government practices, although corruption, including tax evasion, is a major component of the economic ills facing the country today. It is the story of a kleptocratic state and a parasitic capitalist elite who got caught in the web of the eurozone's flawed design when the US financial crisis of 2007–2008 hit Europe's shores.(8) It is also the story of an economy that did not meet the prerequisites for entering an alleged optimum-currency area, nor did it make much attempt to fit in properly. But it is also the story of the general failure of the global neoliberal project, the financialization of the economy and free-market orthodoxy.(9) Indeed, how else could eurozone countries with such dissimilar economies - Greece, a statist and highly corrupt economy; Ireland, a poster-child for neoliberal capitalism; Spain, a faithful follower of EU dictates about deficits and debt - end up suffering the same fate?

The reason is rather simple: because they all orbited the same central entity, the black hole of European neoliberal capitalism. As such, political and ideological differences between social democratic and conservative political parties have long ago vanished. Thus, in Greece, Spain, Portugal and elsewhere, "'social democratic"' governments long ago discarded even the pretext of being agents of progressive reform.(10) Hence the ease with which such governments went along with the EU/IMF dictates in imposing unprecedented cuts and austerity measures that have drastically reduced the standard of living for the working people in their respective countries. In sum, the Greek crisis:

  • stands as a severe fiscal and public debt crisis (during the 1980s and 1990s, annual government expenditures exceeded revenue by an average of more than 8 percent of GDP, while the national debt exceeded 100 percent of GDP) stemming from the deep and long-term structural problems of the Greek economy and the deformities of the domestic political and cultural system
  • represents a European crisis due to the intricate trade and financial ties between Greece and the other eurozone member-states, and
  • reflects the deadly failure of the neoliberal project, which has become institutionalized throughout the EU's operational framework, all while the IMF remains the world's single most powerful enforcer of market fundamentalism. 

At the heart of the neoliberal vision is a societal and world order based on the prioritization of corporate power, "free" markets, and the abandonment of public services. The neoliberal claim is that economies would perform more effectively, producing greater wealth and economic prosperity for all, if markets were allowed to function without government intervention. This claim is predicated on the idea that "free" markets are inherently just and can create effective, low-cost ways to produce consumer goods and services. Subsequently, an interventionist or state-managed economy is wasteful and inefficient, choking off growth and expansion by constraining innovation and the entrepreneurial spirit.

This is the version of neoliberalism developed by Milton Friedman and the Chicago School and usually associated with the Pinochet regime in Chile, and, later, with the free-market policies of Margaret Thatcher and Ronald Reagan - an ideological revolution that was long in the making but that gained ascendancy over Keynesianism with the appearance of stagflation.(11) And it is by far the most dangerous ideology of our time (12), spreading havoc with its "economics of social disaster."(13)

In April 2010, with the bond vigilantes having woken up as a result of Dubai's debt crisis in late 2009, Greece was shut out of the international bond markets and - facing the prospect of a default - sought refuge under an EU/IMF financial rescue scheme. Months prior, the Papandreou government (14) had approached the IMF to extend its "'technical know-how and experience"' to the EU by administering a dose of shock therapy. Greece needed to be "rescued," and the Europeans needed not only the Fund's expertise but also to add an element of legitimacy to the austerity experiment that was about to be performed on a peripheral member-state. In this context, the invitation to the IMF to join in the operation on an ailing European patient served multiple purposes.

The neoliberal quacks were quick to rush to judgment about the roots of the Greek crisis - allegedly, a bloated public sector that wasted too many resources on lazy, unproductive citizens and hindered the potential of the private sector - and lost no time in recommending brutal austerity measures. What if the facts did not fit this narrative? Indeed, all the available data showed that the Greek public sector, while inefficient and corrupt, was actually smaller than the public sector of many other European nations; that Greeks worked on average more than most other Europeans; and that even Greek productivity in the years leading up to the crisis compared favorably with that of Germany.(15) And what if there were huge imbalances in the eurozone, with the core states running huge surpluses and the peripherals running huge deficits?(16) Greece was judged to be solely responsible for the sad state of its fiscal condition in the age of the euro and had to be punished, both as penance for its sins and as a warning to its southern cousins that the same fate awaited them if they didn't put their own fiscal houses in order.

It is this cynical, brutal perspective that led to Greece becoming an unwilling test subject for the EU's neoliberal vision and kept Germany's game going when things got rough in Euroland. Most of the German banks were overexposed to Greek debt and nearly insolvent. The May 2010 bailout of 110 billion euros (with a usurious interest rate of 5 percent) was orchestrated by the EU and the IMF - the twin monsters of neoliberal capitalism - in an apparent attempt to have Greece keep up with its debt payments to foreign banks: hence the rejection of even the slightest consideration of a debt restructuring, even though this would have been the quickest and safest way to allow Greece some breathing room. Helping its economy recover through the coordinated implementation of a large-scale development plan would also have been appropriate in a proper economic and monetary union. Indeed, such moves could have secured the confidence of international bond investors in the euro's sustainability and might even have prevented contagion in the rest of the periphery. They would certainly have prevented the spread of an otherwise avoidable contagion from the periphery to the center, which is clearly underway as of last year. But with the adoption of punishment as policy, contagion in the periphery became inevitable, and with the deficit economies in the periphery wrapped in an austerity straightjacket, the surplus economies of the center were bound to feel the effects of their insane and brutal policies. The economies of both Germany and France contracted in the last quarter of 2012. GDP in the eurozone as a whole fell by 0.5 percent last year, and, more significant, 2012 will go down in history as the first year since 1995 in which no quarter produced growth.(17)

The Catastrophic Effects of Austerity

Indeed, as a policy, the bailout scheme proved to be a dismal failure on every possible front, save for ensuring that debt payments kept flowing to foreign banks. The crude macro-stabilization program and the harsh austerity measures that accompanied the loan to Greece (amounting to 11 percent of the country's GDP) had the opposite of the intended effect on the markets and choked off all prospects of recovery for the Greek economy: demand plummeted due to the deadly combination of massive budget spending cuts, reductions in wages and pensions, and sharp tax increases, causing thousands of small businesses to go bankrupt and forcing several multinationals to move their production facilities to nearby Balkan countries, thereby producing explosive unemployment rates, sharply diminishing state revenues and substantially increasing the debt-to-GDP ratio.(18) The policy pursued by the EU/IMF duo is so fundamentally flawed that Keynes must be rolling over in his grave. Still, economic dogmas ought, apparently, to be respected, no matter what results they produce, so in the mind of the neoliberal zealots, they should be pursued to the bitter end. Thus, less than two years later, a second "bailout" of 130 billion euros was extended to beleaguered Greece, with terms and conditions for allegedly turning the economy around that are much harsher than the first "rescue" attempt. The "pay while you bleed" and "suffer for your sins" policy of the twin monsters should by now be clear to everyone.

In drafting the document for the so-called Second Economic Adjustment Program for Greece, the EU's neoliberal lackeys contended that "Greece made mixed progress towards the ambitious objectives of the first adjustment program."(19) On the positive side, it is noted, the general government deficit was reduced "from 15.75 percent of GDP in 2009 to 9.25 percent in 2011." On the negative side, the recession "was much deeper than previously projected" because, it is claimed, factors such as "social unrest" and "administrative incapacity" (including a lack of effectiveness in combating tax evasion) "hampered implementation." The antigrowth "fiscal and structural adjustment" program was perfectly designed and would have produced all the anticipated results if the government were better able to carry out the policies (perhaps it should have ordered the police and the army to arrest all public administrators and have them shot for disobeying the troika's commands), and if the citizenry did not on occasion make some fuss about the austerity program by staging demonstrations here and there, or by occupying the square outside the Greek parliament building. In essence, this is what the neoliberals' above comments are saying.

The feeble excuses of the EU bureaucrats for the fiscal consolidation program's causing a much sharper economic decline than "previously projected" fly in the face of the recent partial concessions made by the IMF: that the policies carried out in Greece ended up having much more adverse effects on the economy because the IMF miscalculated the impact of the fiscal multiplier. Indeed, the executive summary of the Second Economic Adjustment Program for Greece goes on to state unequivocally that, insofar as the prospects of the success of the second adjustment program are concerned, "the implementation risks ... remain very high" but the success of the program "depends chiefly on Greece."(20)

The neoliberal economics applied to Greece by Germany, the EU and the IMF did not simply cause a greater decline in Greek GDP than "originally projected" or make the debt grow substantially bigger in the course of the last two years (from 126.8 percent in 2010 to 180 percent in 2012). It also produced an economic and social catastrophe of proportions unparalleled in peacetime Europe. In May 2010, when the first bailout was approved and the austerity measures kicked into high gear, the unemployment rate in Greece stood at 12 percent. It has since climbed to 27 percent, and the youth unemployment rate has reached 62 percent. According to the Greek Statistical Authority, the actual number of unemployed reached 1.35 million in November 2012, with the number of employed standing at 3.642 million.(21)

Poverty is also spreading rapidly, affecting all groups in society, including children. In a recent report released by Eurostat, 31 percent of Greeks had a standard of living in 2011 that was close to the poverty line,(22) while the Labor Institute of the Greek General Confederation of Labor (INE-GSEE) states in its monthly publication Enimerosi that by the end of last year, 3.9 million people had fallen below the poverty line.(23) Income levels for workers have also taken a big hit over the last two to three years, and there is more wage suppression to come. According to research data released by the INE-GSEE, incomes dropped by 22.8 percent, or 19 billion euros, during 2010-2011, with a projected decline of 33 billion euros in available income in 2012.(24)

Perhaps most indicative of the catastrophic impact of the EU/IMF austerity measures imposed on Greece is that many schools throughout the country have gone on for a second year without heating oil (the nation was shocked recently by the death of two college students who died in their sleep due to inhalation of carbon monoxide from a makeshift stove as they could not afford heating oil, whose cost has gone through the roof because of the government's ingenious scheme to find extra revenues by raising the taxes on heating oil by 450 percent), the public health care system has collapsed to the point that even medication for cancer patients is not available, and suicides, for a nation that used to have the lowest recorded suicide rates in Europe, are taking place at a record pace.

The aim of the EU/IMF structural adjustment program with regard to the Greek labor market (employment and wages) is crystal clear: total liberalization, minimum wages comparable to those in Bulgaria and Romania (two relatively backward-looking Balkan nations, and with levels of corruption equal to those in Greece), and a potential ban on strikes. The first two elements of the subversive neoliberal labor market policy are well advanced, while the third one is in the works. Again, these measures have an official stamp of approval from the Greek government, including the current administration, a tripartite coalition consisting of the leader of the conservative party as prime minister and the leaders of the Socialist party and the Democratic Left as vice presidents. Moreover, as with every Greek administration since the outbreak of the crisis, the Ministry of Finance serves as a Trojan horse for inflicting the scorched-earth policy of the EU and IMF on Greece's economy and its people.

"The Left's Moment": Problems and Challenges

The scorched-earth policies pursued in Greece over the last three years by Germany and the twin monsters of neoliberalism, i.e., the EU and the IMF, have produced an economic and social catastrophe of unprecedented proportions for a nation in peacetime conditions. For the past three years, Greece has been a guinea pig for the policy prescriptions of a neoliberal EU under the command of Germany and its northern allies. A public debt crisis has been used as an opportunity to dismantle the social state, to sell off profitable public enterprises and state assets at bargain prices, to deprive labor of even its most basic rights after decades of hard-fought struggles against management, and to substantially reduce wages and pensions, creating a de facto banana republic - all with the support of a significant segment of the Greek industrial/financial class and with the assistance of the domestic political elite.

Greece is a nation experiencing a catastrophic crisis of immense proportions inside one of the world's richest regions, yet its government celebrates the fact that the deficit has been reduced as a result of the fiscal adjustment efforts (when virtually all other economic and social variables have gone from bad to worse every year) and expects the citizens to offer more "blood, tears, toil and sweat." At the same time, it is launching a brutal frontal attack on the left, using lies and propaganda and, increasingly, the iron fist of the state, as public opinion polls show consistently for the last few months that the conservative party of New Democracy (which is at the helm of the tripartite government currently ruling the nation) and Syriza, the Coalition of the Radical Left, are in a neck-and-neck race.

The political landscape of Greece has changed radically as a result of the economic crisis. First, the socialists, the true masters of calculated political and ideological duplicity, the real maestros of corruption in Greece, are all but finished as a political force. In the 2012 national elections, the Socialist Party received 12.3 percent of the popular vote, and the latest polls show that its popularity has dropped to about 7 percent. This is the price paid for surrendering Greece to the EU/IMF rescue mechanism in May 2010 and for collaborating since the 2012 elections with the conservatives in finalizing the conversion of Greece into a neoliberal zombie society.

Second, the conservatives, under the leadership of the current prime minister, Antonis Samaras, have shifted from being opponents of the memorandum of agreement with the EU and the IMF when they were the opposition to become its obsequious servants. Their credibility and base support has weakened considerably in the course of the last couple of years, but the conservative constituency in Greece feels trapped and has few options other than perhaps to throw its support behind Golden Dawn, the neo-Nazi party of Greece. To be sure, a good percentage of conservative voters have already done so: the neo-Nazis received 7 percent of the popular vote in the 2012 elections, and their numbers seem to be growing in spite of (in fact, maybe because of) being nothing more than preachers for hate and thugs who carry out organized attacks against immigrants throughout Greece. Ideologically, they embrace Hitler's National Socialism doctrine, strive for racial purity and openly envision the reestablishment of concentration camps for leftists and communists.

Greece's neo-Nazi political party represents a real threat to the social fabric of Greece; however, it remains to be seen how the appeal of the extreme right will be countered when society itself is facing a meltdown because of the harsh austerity measures and the traditional political establishment is morally bankrupt and has lost much of its legitimacy.(25)

The emergence of Syriza as the second-largest party (pulling 26.89 percent of the vote against 29.66 percent for the conservatives) represents the biggest change in the Greek political landscape. In many ways, this is indeed the "left's moment in Greece,"(26) but the reality of the support rate that the left enjoys is more complicated than what the numbers report. Most of its votes in the 2012 elections came from former Pasok voters. This is not to imply that Syriza may eventually rise to power on a protest vote, but it does mean that the left finds itself in the uncomfortable situation of having the backing of a huge percentage of "political orphans." Even more troubling is the fact that many former Socialist Party hacks look to relaunch their political careers by seeking to attach themselves to Syriza's political cause. These are, of course, political opportunists of the highest caliber, and Syriza must turn its back on them if it wishes to keep intact the left's overall mission, vision and core principles.

The general impression among analysts and an increasing number of average citizens is that Syriza is about to become a "new Pasok." This is not far from the truth, especially as some elements close to the leadership of the party appear to be willing to make whatever compromises may be necessary in order to have Syriza rise to power. The party also lacks a clear and coherent agenda for change, and its position on the current crisis has shifted remarkably in the course of the last several months from calling for the abolition of the EU/IMF fiscal adjustment program (but without having an overall strategy for managing the crisis, or even solid support at the grassroots level) to renegotiations of the agreement (when the "troika" - the European Commission, the IMF, and the European Central Bank, or ECB - supervising the fiscal consolidation effort has opposed outright any attempt aiming towards renegotiations of its terms of agreement for the bailout schemes). Conscious, perhaps, of the immaturity of Greek citizenry, but also reflecting its own political and ideological ambiguities, Syriza has also opted not to confront direct exit from the euro as a possible policy option, even though this may, in the final analysis, be the only effective strategy (but with a potentially huge short-term cost) for stopping the permanent decline of the nation's economy. Indeed, as things stand, the current eurozone is doomed to fail, and the peripheral nations will go on experiencing worsening economic and social conditions as the core remains adamantly opposed to any policy options that would mutualize the debt in the eurozone, provide relief for the beleaguered south, or end austerity.

To be sure, Syriza faces daunting challenges ahead, while finding the resolve to deal with them is undermined by the cacophony of views that prevail inside the party and by its lack of apparent influence among working-class organizations and trade unions. The extent to which the organization might be able to find qualified members among its ranks for the tormenting task of turning around a highly inefficient public administrative system and managing an economy which, by the end of the current year, will have seen its GDP shrink by an incredible 25 percent since the onset of the global financial crisis of 2008, is also highly debatable. For a party of the left, Syriza has also shown reluctance, or unwillingness, or inability to embark on an open discussion about the country's future political culture, having chosen, instead, to consume itself scoring political points over the way political corruption was sustained in the past by the conservative and socialist parties.

Yet, if there is anything that the economic crisis in Greece reveals, other than the fact that neoliberal policies wreak havoc on the standard of living and produce massive unemployment and widespread poverty, and that a way must be found to restart the engine of the economy and get the unemployed back to work, it is the need to come to terms with the norms and patterns of the nation's political culture, including revisiting questions of civic virtue, fairness and social provision, expectations and obligations, and articulating visions of a good and decent society.

Having said all that, Syriza remains in Greece today the only political force that can offer hope for the future, put an end to the ongoing catastrophe, and, under certain conditions, work its way toward the realization of a sustainable economic and social order based on those core principles that have long defined progressives worldwide: employment opportunities for all, decent wages, a vigorous and efficient welfare system, free health care services, free education, quality social services, a progressive tax system, democratic accountability, environmental protection, respect for the "other," democratic participation at the workplace, sound business practices, and incentives for new business undertakings.

In politics, there is a huge gap between theory and practice, so Syriza should be neither idealized nor undermined for what it is trying to do, which is to answer history's call and try to rescue the country that gave birth to democracy from becoming ultimately a wretched society and a failed state inside one of the world's richest regions.

C. J. Polychroniou is a policy fellow at the Levy Economics Institute of Bard College. Certain parts of the above article are included in a recent Policy Note (2013/1) published by the Levy Institute and titled "The Tragedy of Greece: A Case Against Neoliberal Economics, the Domestic Political Elite, and the EU/IMF Duo." The views expressed here do not necessarily represent those of the Institute's board nor its advisers.

Endnotes

1.
Some of the most dire warnings against the launching of the euro came from inside Germany itself. Wilhelm Hankel, Karl Albrecht Schachtschneider, Joachim Starbatty, and Wilhelm Nφlling were four renegade professors who opposed the euro from the start and tried to stop it with a legal challenge to Germany's highest court. Obviously, they lost the case. They tried again 12 years later against a German bailout of Greece. They lost again. Their basic claim all along has been was that the euro was an architectural flaw which would lead to the downfall of European economies. Moreover, and in sharp contrast to the original arguments in support of the creation of a single currency zone in Europe, the euro has led to greater economic and social inequality among the various national economies, has exacerbated the problem of unemployment in the peripheral economies, and has produced huge transfers from the periphery to the core.

2.
The original optimal currency area approach was laid out by Robert Mundell in his article "A Theory of Optimum Currency Areas," American Economic Review Vol. 51, No 4 (1961), pp. 657–665. See also R. I. McKinnon, "Optimum Currency Areas," American Economic Review Vol. 53, No. 4 (1963), pp. 717–725.

3.
Greece gained entry into the eurozone by fabricating - with significant help from Goldman Sachs - the true state of the country's fiscal condition. The EU political elite was clearly aware of Greece's actual fiscal condition, but opted to look the other way.

4.
This is the reason that, in spite of the irreparable damage that three years of catastrophic austerity measures - part of the bailout agreements orchestrated by the European Union (EU) and the International Monetary Fund (IMF) - have caused, both to the national interests and to Greece's social fabric, the discussion of exiting the euro remains a taboo virtually across the political spectrum.

5.
The conservative government of Kostas Karamanlis, which came to power in 2004 and governed until 2009, proved to be equally, if not even more, corrupt and immensely incompetent. In fact, from the 1980s onwards, the socialists and the conservatives had ruled the nation in a similar fashion, both of them using the state and its coffers as a means to enrich themselves and their parasitic capitalist partners and to cater to the needs and demands of their political clientele in order to maintain an army of faithful party voters, making it thus virtually impossible to tell which of the two political parties has caused greatest damage to the common good. Both have been implicated in various large-scale scandals that involved exploiting state resources in order to transfer wealth from the public to the private sector and to redistribute wealth from the bottom to the top. Both of them, as well as the private sector, squandered European Union structural funds with reckless abandon, in the process allowing the destruction of vital sectors of the economy to take place (e.g., agriculture). Insofar as the culture of corruption - which the elite saw fit to let spread throughout society, thus creating a system of "corrupt legality" - is concerned, foreign actors also had a major role in it. The German industrial giant Siemens was in the habit of handing out bribes to political figures in order to gain preferential treatment over business deals (i.e., gain state contracts). This was a global practice of Siemens', and it is estimated that the bribes to Greek officials in both main political parties may have been as much as 100 million euros over a ten-year period. Charges were filed in 2008 for money laundering and bribery, but a parliamentary investigative committee that had been formed to examine the Siemens scandal conveniently swept the case under the rug.

6.
Greek Statistical Authority (March 18, 2010). See www.statistics.gr.

7.
Cited on the web site of the Greek Embassy in Washington, DC. See http://www.greekembassy.org/embassy/Content/en/Article.aspx?office=3&folder=1013&article=24631

8.
See Dimitri B. Papadimitriou and L. Randall Wray, "Euroland's Original Sin," Policy Note 2012/8. Annandale-on-Hudson, N.Y.: Levy Economics Institute of Bard College (July 2012). Online: http://www.levyinstitute.org/publications/?docid=1559

9.
C. J. Polychroniou, "The Greek and the European Crisis in Context," New Politics Vol. 13, No. 4 (Winter 2012), pp. 49–56.

10.
See C. J. Polychroniou, "The Mediterranean Conundrum: Crisis in the European Periphery," Economic and Political Weekly, Vol. XLVII, No. 21 (May 26, 2012), pp. 35-41.

11.
A fine new source discussing the history and the policies of neoliberalism is that of Daniel Stedman Jones, Masters of the Universe: Hayek, Friedman, and the Birth of Neoliberal Politics ( Princeton, N.J.: Princeton University Press, 2012).

12.
Among the many profound pieces by Henry A. Giroux on the ideology of neoliberalism, see in particular his latest one "The Politics of Disimagination and the Pathologies of Power," Truthout (February 27, 2013). Online: http://www.truth-out.org/news/item/14814-the-politics-of-disimagination-and-the-pathologies-of-power

13.
See C. J. Polychroniou, "Greece's Bailouts and the Economics of Social Disaster," Policy Note 2012/11. Annandale-on-Hudson, New York: The Levy Economics Institute of Bard College (September 2012). Online: http://www.levyinstitute.org/publications/?docid=1569

14.
George Papandreou, son of Andreas Papandreou, founder of the Panhellenic Socialist Movement (Pasok) and prime minister of Greece for almost ten years, after having won three national elections, became prime minister in October 2009. With no charisma whatsoever and lacking in intellectual prowess and administrative and leadership skills, his failure as a top political dog was all but ensured. He resigned in November 2011, after having ruled the most excruciatingly amateurish and agonizingly incompetent government in modern Greek history, but will always be remembered as the prime minister who "masterminded" the unconditional surrender of Greece to Germany and the IMF and imposed brutal austerity - the prime minister whose ultimate vision was "one working person per family." He is still the leader of The Socialist International, one of the most shameful contemporary political organizations, allegedly at the service of democratic socialism but whose members included, among other "devotees to the cause of socialism and democracy," Egypt's Hosni Mubarak and Tunisia's Zine al-Abidine Ben Ali; and, the irony of all ironies, he gets paid hefty fees to lecture for a few weeks at prestigious institutions like Harvard and Columbia, probably on how to ruin an economy and destroy a nation's sovereignty.

15.
See Dimitri B. Papadimitriou, Gennaro Zezza, and Vincent Duwicquet, "Current Prospects for the Greek Economy: Interim Report," Annandale-on-Hudson, New York: Levy Economics Institute of Bard College (October 2012). Online: http://www.levyinstitute.org/publications/?docid=1589

16.
See Jörg Bibow, "The Euro Debt Crisis and Germany's Euro Trilemma." Working Paper No. 721. Annandale-on-Hudson, New York: Levy Economics Institute of Bard College (May 2012). Online: http://www.levyinstitute.org/publications/?docid=1535

17.
Philip Blenkinsop and Annika Breidthardt, "Euro Zone Economy Falls Deeper than Expected into Recession," Reuters (February 14, 2013). Online: http://uk.reuters.com/article/2013/02/14/uk-europe-economy-idUKBRE91D0CS20130214

18.
C. J. Polychroniou, "Greece's Bailouts and the Economics of Social Disaster," Policy Note 2012/11. Annandale-on-Hudson, New York: The Levy Economics Institute of Bard College (September 2012). Online: http://www.levyinstitute.org/publications/?docid=1569

19.
European Commission, "European Economy: The Second Economic Adjustment Programme for Greece," Occasional Papers 94 (March 2012), p. 1.

20.
European Commission, "European Economy: The Second Economic Adjustment Programme for Greece," Occasional Papers 94 (March 2012), p. 4.

21.
Greek Statistical Authority, "Labour Force Survey: November 2012," Press Release (February 14, 2013).

22.
Cited in ekathimerini.com. "3.4 Million Greeks near Poverty Line in 2011, Eurostat Reports," (December 3, 2012). Online: http://www.ekathimerini.com/4dcgi/_w_articles_wsite1_1_03/12/2012_472690.

23.
INE-GSEE (Labour Institute of the Greek General Confederation of Labour), Enimerosi, No. 200 (December 2012), p. 1.

24.
INE-GSEE (Labour Institute of the Greek General Confederation of Labour), The Greek Economy and Employment: Yearly Report (2012), p.21.

25.
Greece's two main political parties, the conservatives (New Democracy, or ND) and the socialists (Pasok), used to draw, until recently, over 75 percent of the combined vote. In the 2012 elections, both parties together managed to attract less than 35 percent of the popular vote - and if elections were held today, it is unlikely that they would get more than 28 percent of the combined vote.

26.
The phrase is borrowed from the title of an article by Costas Lapavitsas, which appeared in The Progressive, Vol. 76, Issue 7 (July 2012).

The 2013 All Male Treasury Minister Line-Up

Budget 2013 live : Follow George Osborne's announcement here with our 'At A Glance' guide to all the big decisions on the economy. It appears that something was missing from the traditional pre-Budget ministerial photo op in front of Downing Street on...

PICS: George Osborne’s Twitter Photo Gets Hijacked

David Cameron Britain's Prime Minister David Cameron leaves Downing Street to attend Parliament in London, Wednesday, March 20, 2013. Later Wednesday Britain's Chancellor George Osborne will deliver the Spring Budget Statement in Parliament. (AP Photo...

Unemployment Increases To 2.52 Million

Budget 2013 live : Follow George Osborne's announcement here with our 'At A Glance' guide to all the big decisions on the economy. Unemployment has increased for the first time in a year, delivering a pre-Budget blow to chancellor George Osborne and t...

The Long Hot Summer of 2013

I spent a couple of nights last week on the lookout for a cloud of rising smoke. From the chimney at the Vatican? No, thank you -- there were already thousands of journalists around the globe fixated on the ancient mystical wizardry in St. Peter's Square. I was a lot more concerned that black smoke was going to rise from the damp, raw streets of East Flatbush, in a corner of Brooklyn many blocks removed from the high-tech glitz of that borough's new Barclays Center. Night after night, hundreds of young people -- most from the neighborhood -- marched on their local police station house because they wanted answers to a simple question.

Why was a 16-year-old boy named Kimani Gray shot seven times by the New York cops -- three times in the back?

Of course, I had to follow the waves of Brooklyn protest -- which teetered for a time on the brink of a riot -- by way of Twitter, since the mainstream media gave very slight, and usually belated, coverage to the doings in East Flatbush. I guess issues of law and order, civil rights and civil unrest, and the right to assemble on a major street right here in the United States can't really compete with the nearly 2000-year-old rituals of wrinkled men with their bright robes and their white smoke.

Still, I couldn't help but think that -- stop me if you've heard this one before -- there's something happening here. Maybe it was because East Flatbush wasn't the only place in America where unusual things were taking place -- the scattered shrieks of regular people who've been pushed to the edge. As the protests in Brooklyn dragged on, I heard the annual budget speech from the mayor of Philadelphia drowned out and finally shut down by the voice of angry blue-collar municipal workers, frustrated that City Hall will no longer listen to them. Just a couple of weeks ago and about 10 blocks away, so many Philly teens, parents and teachers were so upset at the knee-jerk closing of 23 neighborhood public schools that they filled the expanse of Broad Street as they tried to flood the room where the vote was taking place.

There were 19 people arrested at the Philly school shutdown; about 45 arrested in various encounters and scuffles with the NYPD in Brooklyn. All of these events were treated by the media as a total out-of-left-field shock -- as if a spaceship had landed from Mars and deposited these mad-as-hell aliens on the hardscrabble streets of the inner city. And if you haven't been paying attention, you'd indeed think these scattered events had nothing to do with each other. But to the contrary, the same river of bruised blood runs through all of them -- people who are at long last tired of the drumbeat of disrespect.

grayriot.jpg

Yes, there's the daily harassment of stop-and-frisk, the yearly push for just one more wage cut or pension givebacks even as CEO pay -- and that of top governmental aides -- never seems to stop going up, or thebillionaire-funded death of the dream of educational opportunity for all. But the real reason we're at the snapping point is even more simple than that.

It keeps coming back to a famous quote that I saw pinging around the Internet a lot last week after it was repeated by the city councilman for East Flatbush, Jumanne Williams, at a hearing. It was uttered by Dr. Martin Luther King in a famous address known as "The Other America" speech. He delivered it a couple of times, including outside of Detroit just months after that city had erupted in flames. The civil rights leader re-affirmed his lifelong commitment to non-violent solutions, but he added this:

I think America must see that riots do not develop out of thin air. Certain conditions continue to exist in our society which must be condemned as vigorously as we condemn riots. But in the final analysis, a riot is the language of the unheard.

Dr. King was murdered exactly three weeks to the day later.

Flash forward 45 years later, and there are many conditions in American society that need to be condemned as vigorously as we condemn riots, arguably more than there were in Dr. King's time -- obscene income inequalitystagnant wages, record levels of long-term unemployment, a diminished watchdog media, failing urban schools, militarized police departments and civil rights abuses from rampant spying to a crackdown on public-serving whistleblowers to targeted assassinations.

It's reached the point where people are straining to be heard over the drone of our all-encompassingkleptocracy. It almost broke loose once, in 2011, with the realization that both political parties were selling out the middle-class in a phony debt crisis, and then the world was stunned by the out-of-nowhere Occupy movement -- thousands of unheard struggling to find their own language. That movement faltered for a variety of reasons, including the risen-again hope that democracy in 2012 could redress the people's grievances.

I think those hopes may have crossed a Rubicon, then crashed and burned for good earlier this month when the Dow Jones hit an all-time record, corporate profits swelled -- and not a dime of it trickled down to the American worker, who has watched nearly every dollar of income growth in recent years accumulate to the 1 Percent.

Into this tinderbox walked the 16-year-old Brooklyn kid named Kimani Gray. Those seven police gunshots later, his short life was over. The naysayers were quick to point to Kimani's flirtation with the gangs of East Flatbush and several arrests, and the allegation by police -- fiercely disputed by eyewitnesses -- that he had a gun and pointed it at the plainclothes officers, to dismiss both the value of his life and the cries of the protesters.  But the community deserves answers that it's not getting about what really happened 10 nights ago, as well as the dubious track record of the officers involved.

And New York City officials are doing everyone a huge disservice when they pretend that this is about one kid, and not the daily beatdown of disrespect from programs like stop-and-frisk, which has made it difficult for thousands of young, law-abiding blacks and Latinos to walk down a sidewalk without having to justify their very existence. Today, the courts in the nation's largest city are dealing with a massive class-action lawsuitover the alleged abuses of this policy.

The bottom line is, if it wasn't Kimani Gray, it would have been somebody else.

But no one ever sees it coming. That was the case in Philadelphia, suffering from years of benign and sometimes not-so-benign neglect of public schools and a multi-million-dollar push from the usual suspect of hedge funders, profit-seekers and  to boost charter schools and destroy public education as we know it. The co-conspirators tried (and largely succeeded) to rush through a large-scale scale shutdown of neighborhood schools, but the people formerly known as the unheard did raise of a hell of a ruckus. And they're probably just getting started.

These things don't happen in a vacuum. At the height of the schools crisis, someone emailed me a remarkable document that had been prepared by the Broad Foundation of billionaire Los Angeles "do-gooder" Eli Broad, who wages war on inner-city public education even as his foundation, not so ironically, has trained most of our top urban superintendents.(Now Broad wants to take over the L.A. Times, too -- God help us.) It's an 83-page guide "School Closure Guide" that was published in 2009 to guide presumably Broad-trained superintendents on a step by step method to implement mass closures of public schools in already distressed communities -- exactly what's happening now in Philadelphia, Chicago and elsewhere.

But Broad's minions must act quickly and smartly...before the voices of the unheard become too loud.

But here's the thing: Unheard voices are like water -- they are going to find the path of least resistance. Unless our leaders finally start listening, a trickle in Brooklyn, a leak in Philly, and suddenly there's a full-blown flood. (If you don't understand the oceanography, ask the folks down in New Orleans, another battered American community.)

When we look back on the long hot summer of 2013, and we will, I pray that we'll think of it as a few balmy days on a beach or in the mountains with family and friends after a season of coming together, of finally tackling our root problems from rising inequality to falling civil liberties.

But I worry terribly that it will be the other kind.

Will Bunch is a Pulitzer Prize winning reporter and senior political writer for the Philadelphia Daily News. He blogs at Attytood.com.

‘I Hate Going To Bed A Loyalist And Waking Up A Rebel’

Conservative MPs have expressed their frustration at David Cameron's decision to reach a compromise deal on the Leveson Report that Labour argues includes the statutory underpinning of press regulation - something the prime minister had previously ref...

What Is Modern Monetary Theory, or “MMT”?

Hundred dollar bill macro(Photo: Tetsumo)Modern Monetary Theory is a way of doing economics that incorporates a clear understanding of the way our present-day monetary system actually works – it emphasizes the frequently misunderstood dynamics of our so-called “fiat-money” economy. Most people are unnerved by the thought that money isn’t “backed” by anything anymore – backed by gold, for example. They’re afraid that this makes money a less reliable store of value. And, of course, it is perfectly true that a poorly managed monetary system, or one which is experiencing something like an oil-price shock, can also experience inflation. But people today simply don’t realize how much bigger a problem the opposite condition can be. Under the gold standard, and largely because of the gold standard, the capitalist world endured eight different deflationary slumps severe enough to be called “depressions.” Since the gold standard was abolished, there have been none – and, as we shall see, this is anything but coincidental.

The great virtue of modern, fiat money is that it can be managed flexibly enough to prevent *both* deflation and also any truly damaging level of inflation – that is, a situation where prices are rising faster than wages, or where both are rising so fast they distort a country’s internal or external markets. Without going into the details prematurely, there are technical reasons why a little bit of inflation is useful and normal. It discourages people from hoarding money and encourages healthy levels of consumption and investment. It promotes growth – provided that a country’s fiscal and monetary authorities manage it properly.

The trick is for the government to spend enough to ensure full employment, but not so much, or in such a way, as to cause shortages or bottlenecks in the real economy. These shortages and bottlenecks are the actual cause of most episodes of excessive inflation. If the mere existence of fiat monetary systems caused runaway inflation, the low, stable rates of consumer-price inflation we have seen over the past thirty-plus years would be pretty difficult to explain.

The essential insight of Modern Monetary Theory (or “MMT”) is that sovereign, currency-issuing countries are only constrained by real limits. They are not constrained, and cannot be constrained, by purely financial limits because, as issuers of their respective fiat-currencies, they can never “run out of money.” This doesn’t mean that governments can spend without limit, or overspend without causing inflation, or that government should spend any sum unwisely. What it emphatically does mean is that no such sovereign government can be forced to tolerate mass unemployment because of the state of its finances – no matter what that state happens to be.

Virtually all economic commentary and punditry today, whether in America, Europe or most other places, is based on ideas about the monetary system which are not merely confused – they are starkly and comprehensively counter-factual. This has led to a public discourse about things like budget deficits and Treasury debt which has become, without exaggeration, utterly detached from reality. Time and time again, these pundits declaim that hyperinflation is imminent, that interest rates are on the verge of an uncontrollable upward spike, and that the jig will be up for sure just as soon as the next T-bond auction fails. But even though, time after time, it is the pundits’ prognostications which fail, no one seems to take any notice. This must change. A reality-based economics is needed to make these things make sense again, and Modern Monetary Theory is here to put everyone on notice that a quite different jig is the one that’s really up.

The gold standard was finally and completely abolished over the course of a two-year period which started in 1971, when Richard Nixon ended the convertibility of the dollar for gold and devalued U.S. currency for the first time since the end of World War II. In 1973, the U.S. stopped trying to peg the dollar to any currency or commodity, instead allowing its value to be set on a freely-floating international currency market. The monetary system we inaugurated then is the one we still have now.

It is not the same as the one which has been adopted by most of Europe – and this very prominent source of confusion about the role of money in the world today will receive close scrutiny at the proper point. But first, we need to carefully unpack the implications of taking both gold and any sort of “peg” out of the monetary equation in the first place. In 1971, gold-linked money became fiat-money – not for the first time, of course, but for the first time in a long time. And it wasn’t just any currency. It was, by far, the world’s most important currency, economically. It was also the world’s reserve currency – the good-as-gold and backed-by-gold currency which the entire non-communist world used to settle transactions between various countries’ central banks. And yet, what everyone, and especially every American was told at the time was that it really wouldn’t make much difference. 

The political emphasis, at the time, was entirely on the importance of making sure that no one panicked. The officials of the Nixon administration acted like cops who had just roped off a fresh crime scene: “Just move right along, folks,” they kept intoning. “Nuthin’ to see here. Nuthin’, to see.” All of the experts and pundits said essentially the same thing – this was just a necessary technical adjustment that was only about complicated international banking rules. It wouldn’t affect domestic-economy transactions at all, or matter to anyone’s individual economic life. And so it didn’t – at least, not right away or in any way that got linked back to the event in later years. The world moved on, and Nixon’s action was mainly just remembered as a typical, high-handed Nixonian move – one which at least carried along with it the virtue of having pissed off Charles De Gaulle.

But what had really happened was epoch-making and paradigm-shattering. It was also, for the rest of the 1970s, polymorphously destabilizing. Because no one had a plan for, or knew, what all of this was going to mean for the reserve currency status of the U.S. dollar. Certainly not Richard Nixon, who was by then embroiled in the early stages of the Watergate scandal. But no one else was in charge of this either. In the moment, other countries and their central banks followed Washington’s line. They wanted to forestall any kind of panic too. But, inevitably, as the real consequences of the new monetary regime kicked in, and as unforeseen and unintended knock-on effects began to be felt, this changed.

The world had a choice to make after the closing of the gold window, but even though it was a very important choice, with very high-stakes outcomes attached to it, there was no international mechanism for making it – it just had to emerge from the chaos. Either the U.S. dollar was going to  continue to be the world’s reserve currency or it wasn’t. If it wasn’t, the related but separate question of what to use instead would come to the fore. But, as things unfolded, no other choice could be imposed on the only economic powerhouse-nation, so all the other little nations eventually just had to work out ways to adjust to the new status quo.

Even after Euro-dollar chaos, oil market chaos, inflationary chaos, a ferocious multi-national property crash and a severe, double-dip American recession, the dollar continued to be the reserve currency. And it still wasn’t going to be either backed by gold or exchangeable at any fixed rate for anything else. But while the implications of this were enormous, almost no one understood them at the time, or ever, subsequently, figured them out. For the 1970s was the period during which Keynesianism was decertified as the reigning economic philosophy of the capitalist world – replaced by something which, at least initially, purported to have internalized and improved upon it. This too was a choice that wasn’t so much made as stumbled into. The chaotic, crisis-wracked world we now live in is the one which subsequent versions of this then-new economic perspective have helped to create.

Conventional, so-called “neo-classical” economics pays little or no attention to monetary dynamics, treating money as just a “veil” over the activity of utility-maximizing individual “agents”. And, as hard as this is for non-economists to believe, the models which these ‘mainstream’ economists make do not even try to account for money, banking or debt. This is one big reason why virtually all members of the economics profession failed to see the housing bubble and were then blind-sided by both the 2008 financial collapse and the grinding, on-going Eurozone crisis which has followed in its wake. And the current group-think among ‘mainstream’ economists is yet another case where failure is no obstacle to continued funding – or continued failure. The absence of any sort of professional, intellectual or academic accountability will be a theme here.

The public policy reversal that began with Margaret Thatcher and Ronald Reagan promised that the deregulation of capitalism would lead to greater shared prosperity for everyone. Today, even though the falsehood of this claim is brutally obvious, the same economic nostrums and stupidities that were used to justify it in the first place continue to be trotted out and paid homage to by a class of financial-media personalities who equate making a lot of money with understanding money. It does not seem to occur to them that financial criminals and practitioners of bank-fraud can get rich through sociopathy alone.

What needs to be said is this: Keynesian economics worked before, and the improved version – now generally called “post-Keynesian” – will work again, to deliver what the market-fundamentalism of the past three decades has patently and persistently failed to deliver *anywhere in the world*. Namely – a prosperity which is shared by everyone. The principal purpose of Modern Monetary Theory is to explain, in detail, why this this worked in the past and how it can be made to work again.

Here’s how: start with a 100% payroll tax cut for both workers and employers – one that will only expire (if it does at all) when we have achieved full employment. This will not de-fund Social Security. And yes, we’ll come back to this point and cover it in great detail in due course. But first, stop and think back on the effect which federal revenue-sharing had on the economy in 2009 and 2010. If you’re thinking there were fewer teachers, nurses, policemen and fire-fighters getting laid off, you are correct. If you’re thinking that more roads, dams, bridges and sewer systems were getting repaired, you’re right again. But if you think that adding 800 million dollars to the deficit over two years is a guaranteed way to generate hyper-inflation, double-digit interest rates and bond-auction failures, leading ultimately to a frenzied worldwide rush to dump dollar-denominated financial assets, well, now would be a good time to ask yourself why you believe this.

One more point – one more plank in this three-point program to restore fiscal and monetary sanity: let’s give everyone who wants to work and is able to work some *work to do*. A currency-issuing government can purchase anything that is for sale in its own currency, including the labor of every last unemployed person who is still looking for a job. So, a key policy recommendation of Modern Monetary Theory is the idea of a “Job Guarantee”. The federal government should take the initiative and organize a transitional-job program for people who just can’t find work in the private sector – as it currently exists in real-world America today. Because the smug one-liner that starts and ends with: “Government can’t create jobs – only the private sector can create jobs!” is about the un-funniest joke on the planet right now.

The government creates millions of jobs already. Isn’t soldiering a job? Isn’t flying the President around in Air Force One a job? What about all the doctors and nurses down at the V.A. hospital, and the day-care workers on military bases? They certainly all appear to be employed. When you go into a convenience store to buy some – uh – local-and-organic Brussels sprouts, say, how closely does the clerk examine the bills and coins you tender? Did any clerk or cashier ever squint or turn your five-dollar bill sideways and back and ask, “Hmm.. are you sure this money came from work that was performed in the private sector?” No. They didn’t. Because the money governments pay to public employees is exactly the same money everyone else gets paid in.

A guaranteed transition-job would need to be different from the familiar examples cited above in certain ways. It would be important to make sure that such a program always hired “from the bottom”, not from the top. That’s an important way of making sure that such programs don’t create real-resource bottlenecks by competing with the private sector for highly skilled or specialized labor. Hence, a transition-program job would more closely resemble an entry-level job at a defense plant. Such a job only exists because of Pentagon orders for fighter planes or helmets or dog food for the K-9 units. There is no sort of ambiguity about where the stuff is going or how it is being paid for. And when the people who mow the lawn or sweep the parking lot get paid, they know, without having to think about it, that their wages will spend exactly the same way down at the grocery store as everyone else’s.

Defence spending is actually quite a good analog to the idea of a transitional-job program – one that would provide work to any and every person who wanted it. The only time the American economy ever achieved an extended, years-long period with zero unemployment, low, well-controlled inflation rates and with no significant financial aftershock at the end was the World War II era – broadly defined to include the Lend-Lease buildup of 1940 and 1941. This solution to the problem of mass unemployment worked in the 1940s and it would work today. In the 1940s, of course,the jobs were almost all war-related. But, economically, this makes no difference.

The connection between war and economic prosperity has been noticed before. It led some 19th Century thinkers (and also Jimmy Carter) to wonder whether there could be a “moral equivalent of war”. Well, there can be – by way of the Job Guarantee. The biggest pre-condition has been met, because one result of most wars has been that they forced the combatant countries off the gold standard. Now, all countries have left it. What matters next is whether there are enough real resources available to produce goods and services that are equal in value to the government’s job-guarantee spending. If these resources are available – if they are not already being used to produce something else – then the increased demand that results from the payment of job-guarantee wages will not be inflationary, regardless of what they go to produce.  

Money is 100% fungible.  Whether the job-guarantee program makes fighter planes or wind turbines makes no economic difference – the workers employed by it will spend their wages on the same things other workers buy. What matters, economically, is whether there are sufficient real resources and labor available to produce these goods and services in line with the increased demand for them. If there are, no additional government intervention is necessary in order to mobilize them. The same private-profit motivation which induces a company to produce one widget can be relied upon to induce the production of another one.

Most popular misconceptions about job-guarantee work as inefficient “make-work” ignore these private-sector dynamics. It is simply assumed that if the publicly-funded workers don’t personally contribute to making shoes or soap, their wages will result in “more money chasing the same goods” – and that this will automatically cause inflation. This is an obvious fallacy which has been empirically falsified many, many times, but most people continue to treat it as an article of economic faith. So, one of MMT’s most pressing tasks today is to make the case that we can, indeed, end mass unemployment without undermining price stability.

There are many other economic problems and challenges in the world today. Modern Monetary Theory is not a panacea for them. Even if its insights and policy recommendations become widely known, and even if they are someday fully implemented, societies will still face challenges such as inequality, regulatory capture and predatory financial behavior, including the kind of predatory mortgage lending that led to the worldwide crash in 2008. In order to understand these additional economic problems and dangers, we need to look at economics in a larger context, and correctly situate Modern Monetary Theory within this wider frame.

Modern Monetary Theory is based on earlier work which also focused on the relationship between the state and its money – ideas which come under the generic designation of “Chartalism”. MMT also remains firmly within the Keynesian tradition of macroeconomnic theorizing, and recognizes an extensive interconnectedness with other economists whose work is categorized as “post-Keynesian”. Some of MMT’s other notable academic progenitors include Hyman Minsky, Abba Lerner and, more recently, the English economist Wynne Godley, whose emphasis on achieving consistency in the analysis of economic stocks and flows presaged the emphasis which MMT-orbit economists put on it today.

The label “Modern Monetary Theory” is not particularly apt. It became attached to its advocates through the informal agency of Internet comment-threading, not because anyone considered it either very useful or very descriptive. In other words, it “just stuck”. In fact, the identity of the first person to use the “MMT” label is lost to online history. So, to be clear, MMT is only modern in the broad sense in which virtually everything that got started in the Western world in the 19th Century is called “modern”. It is not exclusively monetary either – it has quite a bit to say about fiscal policy as well. And it was not, initially, theoretical – it started as a body of quite empirical observations about the dynamics of the monetary system and the many ways they are being misunderstood these days. For MMT has a dual pedigree which is itself quite remarkable.

On the one hand, it represents the patient, decades-long academic work of a cadre of perhaps eight or ten working economists (originally there were three or four, plus their students). But MMT was independently co-discovered by a single person. A person who had no specific training or academic background in economics at all – the American businessman and auto-racing enthusiast Warren Mosler. How he came to initially suspect and, ultimately, clearly understand that the spending of sovereign governments had become operationally independent of their taxing and borrowing is recounted in his 2010 book, “The Seven Deadly Innocent Frauds of Economic Policy.”  The 1996 publication of an earlier book of his, “Soft-Currency Economics,” launched MMT as a social, intellectual and online movement. And while the academic side of MMT was completely unknown to him at first, it was not long before the two camps discovered each other, and this has led to a very extensive collaboration in the years since.

Today, MMT is being discovered by a rapidly-growing worldwide Internet audience. And the public’s growing interest in MMT is evident in other ways as well. One of the movement’s leading spokespersons, Dr. Stephanie Kelton of the University of Missouri at Kansas City, has been a repeat guest on an MSNBC weekend show. She, and other MMT economists, are frequent guests on a number of popular, mostly-progressive radio programs as well – both in the U.S. and in English-speaking countries around the world. And Warren Mosler’s seminal 2010 book was recently published in Italian.

(For obvious reasons, the stressed and austerity-damaged countries of the Eurozone’s southern tier are places where people are becoming more open to fresh economic ideas. At a 3-day conference in Rimini, Italy in 2012, a panel of four MMT/post-Keynesian speakers lectured to a crowd of over 2,000 people in a packed sports arena. Many in the audience crossed multiple international borders to attend.)

MMT has been mentioned, though not yet accurately described, in several of Paul Krugman’s columns for the New York Times. And certain aspects of it have been noticed even more widely in the media – for MMT is the theoretical basis of the “trillion-dollar coin” approach to fiscal cliffs. (The idea was first proposed and debated on Warren Mosler’s website.) In short, MMT is getting harder and harder to ignore. And since it really does have answers to some of the world’s most urgent and otherwise perplexing questions, it seems likely that MMT will soon become quite impossible to ignore. What follows is written to try to hasten that day.

This will be an intentionally simplified, non-technical exposition of the principal tenets of Modern Monetary Theory. The no-algebra version, in other words. It is intended as a guide for non-economists and other lay people who may have heard the phrase or seen a video clip about MMT and who wish to learn more. It is not a substitute for more complete and, necessarily, much more technical treatments that are available elsewhere, including the MMT Primer here at NEP.

Confining myself to examples and cases so widely known that no one will wonder where they came from accounts for the absence of footnotes in this. And since I make no claim to have learned knowledge of anything, I will just say, up front, that everything I know was thought of first by someone else. But rather than interrupt the narrative or complicate the process by trying to establish who said any particular thing first, I hope it is sufficient for me to just thank the MMT community at large for any material that I have borrowed or re-purposed along the way.

I also depart, here, from MMT’s mostly-neutral stance on contested political and ideological questions. For while MMT principles apply equally, irrespective of things like the size of government or the conceptions and misconceptions of people running governments, it has a policy bias no one can really miss.  I choose to emphasize rather than de-emphasize this bias – and I will sometimes even put it front-and-center. I hope no one will mistake this for any sort of rebuke toward those who choose not to do this. We have simply reached a point where practical applications need to be put on an equal footing with their theoretical underpinnings.

For somewhere – maybe somewhere in Italy – and on a day which may not be all that far off now, Modern Monetary Theory is going to start changing the world.

‘If you were a man, we’d kill you’: Captive journalist tells RT how she...

Published time: March 13, 2013 20:06

Anhar Kochneva. (Image from facebook.com)

Download video (70.55 MB)

‘I couldn’t bear it any longer’, recalls Anhar Kochneva. The Ukrainian journalist who escaped Syrian rebels five months after she was kidnapped told RT about what she had to go through while in captivity and how she managed to run away.

Kochneva, a journalist and blogger who reported as a freelancer for Russian and Ukrainian news outlets, was captured at the beginning of October 2012 near the Syrian city of Homs.

The kidnappers - members of the Free Syrian Army – repeatedly threatened to kill her if the US $50 million ransom was not paid. The sum was later reduced to reportedly US$ 300,000. The rebels said they had planned to put Kochneva to death on December 16, but decided to "give her a second chance."

Several world powers – including Russia, the US and France - as well as international human right organizations, urged the Syrian opposition to release the woman. 

She escaped on Monday after spending more than 150 days in captivity, which damaged her health. The journalists walked for 15 kilometers in the mountainous area before she was lucky to meet people who helped her to get to the region controlled by the Syrian army.

Kocheva says it was only “thanks to God” that she is free again. In an interview with RT Arabic the journalist shared details of her escape.

RT: How did you manage to escape from captivity?  Who helped you do that?

Anhar Kochneva: No one, but Allah. Though, I know that many tried to help. The problem was that no one knew where I was – even the militants from the same group who were visiting that house did not know that I was kept there.

After I was kidnapped, my health seriously declined and there was a danger that I wouldn’t get cured and simply die. Or [the militants] would kill me, or the [Syrian] army would shoot me down accidentally when returning fire on the militants. It was really dangerous. I spent five months there.

RT: Could you tell in more detail about the escape? Was there security at the door?

AK: I only had to open the door and get outside. I started thinking about the best time to do that so that no one would see me because they could kill me. At night they would open fire every time they noticed any kind of movement and didn’t know what that was – a human or anything else. I had a million things to consider as it was a very dangerous action. If they had caught me, they would definitely beat me and toughen the conditions they kept me in. Angered, they could even kill me.

I opened the door which was locked from inside the house because the guards were there. I got to the street and went down the road. I kept walking and walking.

RT: So, the guards were sleeping at that time?

AK: Yes, yes. They were sleeping.

RT: They simply fell asleep and left the key in the door lock?

AK: Yes. They thought I wouldn’t do anything. Actually, there wasn’t even a key there – just a usual bolt.

So, they were sleeping and I walked out. I wanted to find someone on the road to tell them who I was and ask for help. Of course, there was a danger that they would give me away.

Thank God, I met people who helped me to get out of that district. I knew nothing about that area, I had no idea where were militants, where were [government troops], where were mines. I went across fields where mines could be.

RT: How were you captured? Did you recognize people who did that? How did they treat you all the time you were kept hostage?

AK: Sincerely, for first 50 days I had a very good opinion of them. And they didn’t think that I could go anywhere. For instance, a guy who kept watch over me used to support me most of the time. He would even give me his food and stay hungry himself.

But then they got tired of me staying there because they couldn’t leave and do something else. Sometimes they had to spend their own money on me as they were not given a budget to provide me with food, water or clothes. I was dressed in summer clothes, but when winter came I wanted warm clothes.

My presence there turned into burden for them and they felt angry with me, started abusing me, hitting without a reason and so on. They got harsher with me. They began to close the door. For instance, I needed to use the loo, but the door was closed and no one would open it for me. What did I have to do? I couldn’t bear that any longer.

To be honest, I know that they were saying “If you were a man, we would kill you.” And, naturally, they demanded a ransom for me. That’s why they treated me better than those who they simply wanted to slaughter.

PMQS: Miliband Mocks Cameron: ‘What Can He Organise In A Brewery?’

Ed Miliband unleashed his best ever gag at the start of prime minister's questions on Wednesday, mocking David Cameron for reports he has been forced to abandon his plans to introduce a minimum price for alcoholic drinks.

"In the light of his u-turn on alcohol pricing can the prime minister tell us if there is anything he could organise in a brewery?" the Labour leader said to roars of laughter from his MPs.

It has been reported that opposition to the policy from his cabinet, including from former health secretary Andrew Lansley, education secretary Michael Gove and home secretary Theresa May - who is said to be positioning herself to challenge for the Tory leadership - Cameron has had to drop the plan.

Miliband joked: "He obviously could not tell us about his policy on alcohol minimum unit pricing, I think the reality is he has just been overruled by the home secretary on this one."

The barb did not go down well with May, who, stood next to the Speaker's chair rather than sat on the government front bench, responded with her now trademark 'death stare'.

Generated image from gifs generated with the Imgflip Animated GIF Generator

Downing Street has refused to say whether plans for minimum pricing had been dropped, insisting the policy will be unveiled in "due course".

LIKE HUFFPOST UK POLITICS ON FACEBOOK | FOLLOW US ON TWITTER

The prime minister's official spokesperson said there was a "real problem with deep discounting and the impact of anti-social behaviour" that had to be tackled.

During PMQs Cameron was directly confronted in the Commons by Tory MP Sarah Wollaston - a former GP - who said abandoning minimum pricing would "critically undermine future efforts".

He told her: "There is a problem with deeply discounted alcohol in supermarkets and other stores and I am absolutely determined that we will deal with this.

"We published proposals, we are looking at the consultation and the results to those proposals, but be in no doubt, we've got to deal with the problem of having 20p or 25p cans of lager available in supermarkets. It's got to change."

A confident Miliband, who enjoyed one of his best PMQs performances to date, said reported cabinet splits showed the government was "falling apart".

"A week out from the Budget, they have got an economic policy that's failing, a prime minister that makes it up as he goes along and all the time, it's the country that is paying the price," he said.

Loading Slideshow...

  • Theresa May

    Current position: Home Secretary Rides: "Beyond The Borders" Odds to win: 4/1 For: Politically, May is a shrewd and successful operator who has done a credible job as home secretary, a role that has tripped up many previous politicians. Against: A Tory minister recently described May as "100% charmless" and the only benefit that her appointment as leader would bring would be "net migration".

  • Boris Johnson

    Current position: Mayor of London Rides: "Bumbling Oratory" Odds to win: 5/1 For: Boris is rarer thing than a <a href="http://redirect.viglink.com?key=11fe087258b6fc0532a5ccfc924805c0&u=http%3A%2F%2Fwww.sugarbushdrafthorse.com%2Frevival.html">Sugarbush Draft Horse,</a> he's a "popular Tory". An <a href="http://redirect.viglink.com?key=11fe087258b6fc0532a5ccfc924805c0&u=http%3A%2F%2Fwww.huffingtonpost.co.uk%2F2012%2F10%2F07%2Fboris-johnson-preferred-to-david-cameron_n_1945895.html">opinion poll last October</a> outed him as the people's choice to replace Cameron. Unfortunately, it's not up to the people... Against: Johnson has all but ruled out taking over from Cameron before 2015, wary that undermining him could scupper any leadership hopes. Just like what happened to Lord Heseltine in the wake of Margaret Thatcher stepping down...

  • Michael Gove

    Current position: Secretary of State for Education Rides: "Baccalaureate Backtrack" Odds to win: 9/1 For: Gove is highly regarded within the Tory party as charming, polite and capable. Against: He has taken a bruising both from the public and other Tories for some of his proposals as Secretary of State for Education.

  • Philip Hammond

    Current position: Defence Secretary Rides: "Stripped Down Defender" Odds to win: 10/1 For: Erm... Against: Recently received a "slapping down" from Danny Alexander for publicly complaining about defence cuts. Also, he's possibly the most "beige" of all the prospective candidates.

  • Adam Afriyie

    Current position: MP for Windsor Rides: "Outside Upstart" Odds to win: 25/1 For: Afriyie is part of the new generation of Tories with fewer qualms about toppling their leader. One Tory minister said: "<a href="http://redirect.viglink.com?key=11fe087258b6fc0532a5ccfc924805c0&u=http%3A%2F%2Fwww.telegraph.co.uk%2Fnews%2Fpolitics%2F9916975%2FTories-too-afraid-of-fresh-chaos-for-leadership-coup.html">They don't have the same memory or experience to hold them back</a>. "And if they start to think they're going to lose their seats at the election, they could get a bit panicked." Against: Was widely ridiculed earlier this year when the relative unknown was tipped for a leadership challenge. Also, no-one seems to have told him about his own challenge until he read about it in the papers and "<a href="http://redirect.viglink.com?key=11fe087258b6fc0532a5ccfc924805c0&u=http%3A%2F%2Fwww.guardian.co.uk%2Fpolitics%2F2013%2Fjan%2F31%2Fadam-afriyie-pm-in-waiting">nearly choked on my Cornflakes</a>".

  • Liam Fox

    Current position: Rides: "Spend Wisely" Odds to win: 33/1 For: Dr Fox has become the unofficial spokesman for those Tories disaffected with the current leadership with a number of public statements criticising their direction on austerity. Against: Is it really a good move to appoint someone who was forced to resign from his job as defence minister for <a href="http://redirect.viglink.com?key=11fe087258b6fc0532a5ccfc924805c0&u=http%3A%2F%2Fwww.huffingtonpost.co.uk%2F2011%2F10%2F09%2Fliam-fox-resigns_n_1002156.html">allowing a close friend improper access to the highest level of government affairs?</a> Additionaly, <a href="http://redirect.viglink.com?key=11fe087258b6fc0532a5ccfc924805c0&u=http%3A%2F%2Fwww.huffingtonpost.co.uk%2F2013%2F03%2F11%2Fliam-fox-tory-leadership_n_2851902.html">Fox recently said</a>: "I think there is no chance of us having a leadership election in the Conservative Party before the election, I think that would be madness."

Earlier on HuffPost:

Frontrunning: March 12

  • Cardinals head to conclave to elect pope for troubled Church (Reuters)
  • Hyperinflation 'Unthinkable' Even With Bold Easing: Abe (Nikkei)
  • Ryan Plan Revives '12 Election Issues (WSJ)
  • Republicans to unveil $4.6tn of cuts (FT) - Obama set to dismiss Ryan plan to balance budget within decade
  • Italy 1-yr debt costs highest since Dec after downgrade (Reuters)
  • CIA Ramps Up Role in Iraq (WSJ)
  • Hollande Hostility Fuels Charm Offensive to Show He’s No Sarkozy (BBG)
  • SEC testing customized punishments (Reuters)
  • Judge Cans Soda Ban  (WSJ)
  • Hungary Lawmakers Rebuff EU, U.S. (WSJ)
  • Even Berlusconi Can’t Slow Bulls Boosting Euro View (BBG) - luckily the consensus is never wrong
  • Funding for Lending ‘put on steroids’ (FT)
  • Investigators Narrow Focus in Dreamliner Probe (WSJ)
  • With new group, Obama team seeks answer to Karl Rove (Reuters)
  • Boston Booms as Workers Say No to Suburbs (BBG)

Overnight Media Digest

WSJ

* Illinois settled Securities and Exchange Commission civil-fraud charges that the state misled municipal-bond investors by failing to adequately disclose the risks of its underfunded pension system.

* Lawmakers grilling Mary Jo White, President Barack Obama's nominee for chairman of the Securities and Exchange Commission, on Tuesday will have to weigh two seemingly contradictory versions of the attorney.

* U.S. aviation safety investigators examining Boeing Co's 787 Dreamliner increasingly are focusing on manufacturing or design problems with the batteries as possible causes of overheating rather than on other parts of the jet's electrical system, the head of the National Transportation Safety Board said on Monday.

* Starr International Co, run by the former chief executive of American International Group Inc, won the right to pursue as a class action its case against the U.S. government, alleging that elements of AIG's financial-crisis bailout package were unconstitutional.

* A crisis of confidence in the nuclear-power industry has trickled down to Namibia, where uranium accounts for 12 percent of exports. But uranium prices are down 70 percent over the past six years.

* General Motors Co is in the process of changing advertising agencies of its Cadillac brand. Advertising and marketing work to support Cadillac, valued at about $250 million, will be moved to longtime Michigan advertising agency Campbell Ewald, according to three people briefed on the matter.

* The monopoly powers of Mexico's telephone giant, América Móvil SAB de CV and leading broadcaster Grupo Televisa SAB, are coming under fire with a broad set of new laws that aim to open up the telecommunications and television businesses to competition.

* Many small U.S. banks are feeling a financial pinch from the government's efforts to punish executives and directors of banks that collapsed during the height of the financial crisis.

* KKR & Co LP is considering teaming with other private equity firms to pursue biotech firm Life Technologies Corp, according to people familiar with the matter, in the latest sign that buyout shops are still willing to form "clubs" if they covet a large target.

* VeriFone Systems Inc Chief Executive Douglas Bergeron is stepping down after a dozen years at the helm of the card-payment systems maker. The company said it will hire an executive-search firm to find a successor, with Chairman Richard McGinn serving as CEO on an interim basis.

FT

Dell Inc has agreed to give Carl Icahn a closer look at its books less than a week after the activist investor joined a growing chorus of opposition to founder Michael Dell's plan to take the world's No. 3 personal computer maker private.

Private equity firms are looking to buy the UK property business of Germany's second-biggest lender, Commerzbank AG, in a potential 5 billion pound ($7.45 billion) deal.

UK lender LLoyds Banking Group plans to sell 20 percent of its stake in wealth manager St James's Place

Alibaba Group has chosen Jonathan Lu, its Chief Data Officer who has more than a decade of experience in executive roles, to lead China's largest e-commerce company as it prepares to launch an initial public offering.

Italy's central bank has told some of the country's biggest banks to increase their bad loan provisions by an estimated 21 billion euros ($27.33 billion) amid deepening of a nearly two-year old recession.

Billionaire hedge fund manager John Paulson is exploring moving to Puerto Rico from New York to lower his tax bill.

Richard Joseph, a former futures trader, was convicted of six counts of insider trading, leaking information from the print room at JPMorgan Cazenove. Joseph placed spread bets with CMC Markets ahead of a series of deals in 2007 and 2008.

Mexico is looking to overhaul its telecom industry by introducing sweeping proposals that will increase competition and limit the control of telecoms tycoon Carlos Slim and broadcasting giant Televisa.

NYT

* For the second time in history, federal regulators have accused an American state of securities fraud, finding that Illinois misled investors about the condition of its public pension system from 2005 to 2009.

* A state court judge invalidated New York City's new restrictions on sweetened beverages on Monday, a day before they were set to take effect, saying the rules were "arbitrary and capricious."

* Britain, unlike other economic powers, is responding to the financial crisis by creating two new agencies, one to oversee institutions and another to watch for market abuses.

* In advance of a summit meeting of European Union leaders on Thursday in Brussels, the president of the European Commission, José Manuel Barroso, called on the bloc's 17 members to stay the course on austerity.

* Intrade, the online betting site, announced late on Sunday that it had halted trading and frozen customer accounts after the discovery of potential financial irregularities.

* Oppenheimer & Co will pay nearly $3 million to settle accusations by federal and state regulators that it misled investors about the performance of one of its private equity funds, in a case that signals stepped-up scrutiny of the buyout industry and how it values its holdings.

* Dell Inc has agreed to open its books to the activist investor Carl Icahn, signaling a possible truce on one front in the battle over the computer maker's proposed $24.4 billion buyout.

* In prepared testimony for her nomination hearing, Mary Jo White placed a premium on unearthing financial fraud, as she works to deflect concerns from lawmakers who question her ability to regulate banks she recently defended.

* British authorities have opened an investigation into Hewlett-Packard Co's claims that it was duped when it bought the business software maker Autonomy, according to regulatory documents filed on Monday.

Canada

THE GLOBE AND MAIL

* Ottawa and the Northwest Territories have reached a deal to hand the territory province-like power over its land, a move aimed at empowering local leaders to unlock more of their resource riches.

* Less than a third of the almost 300,000 members and supporters who signed up to choose the Liberal party's next leader have so far registered to vote, prompting front-runner Justin Trudeau's camp to complain about a host of technical glitches and request a one-week extension on registration.

* The federal government is facing questions over the legitimacy of its centerpiece for aboriginal education reform. Manitoba chiefs rejected the Harper government's vision for aboriginal education on Monday, claiming Ottawa is trying to "bypass" first nations chiefs and shirk its treaty responsibilities.

Reports in the business section:

* Chrysler Canada is jumping back into leasing for the first time since 2008, raising the competitive stakes another notch in an auto market already awash with financing and leasing incentives.

* AT&T Inc will begin selling BlackBerry's new BlackBerry Z10 smartphone next week, marking the smartphone's debut in a crucial U.S. market that has largely shunned the company's devices in recent years.

* Molson Coors Brewing Co's Canadian arm sold far less Miller Genuine Draft beer in the country over the past three years than the targets called for under its agreement with Miller Brewing Co. That under-performance - spelled out in court filings - is at the crux of a dispute that has erupted between the two companies, as Miller tries to cancel its Canadian licensing agreement with Molson.

NATIONAL POST

* The federal government, which has come under fire over tougher employment insurance (EI) rules, is sweetening benefits for parents. It says it will allow individuals receiving parental benefits through EI to qualify for sickness benefits as well, starting March 24.

* The latest annual report on federal ad spending shows Ottawa shelled out C$78.5 million ($76.5 million) in 2011-12 telling Canadians about everything from the switch to digital TV and the War of 1812, to elder abuse and anti-drug messaging. The Harper government spent C$21 million on major advertising campaigns under its Economic Action Plan brand.

* Despite activist claims that the city's homeless are dying due to a lack of shelter space, there is no shelter bed shortage in Toronto, according to an internal report prepared for city council.

FINANCIAL POST

* After years of growth, economists say the real estate boom is over and predict Canadian housing prices to flatline over the next decade. A TD Economics study, Long-Run Rate of Return for Canadian Home Prices, predicts a "string of lackluster performances" over the next few years.

* Alamos Gold Inc is going on the offensive in the takeover battle for Aurizon Mines Ltd, asking a securities regulator to reject both a break fee and poison pill that it believes are highly irregular.

* Travel tour operator Transat AT Inc said it has managed to wrest concessions from its flight attendants as the company continues its campaign to be more cost competitive. The bulk of the expected C$9 million in annual savings will come from Transat lowering the amount of flight attendants on its Airbus A330s to 10 from 11, and the move will also support a potential shift to a fleet of Boeing Co's 737s.

China

SECURITIES TIMES

-- Huatai Securities said on Tuesday its board of directors had sanctioned the issuance of no more than 10 billion yuan of corporate bonds on the Shanghai Stock Exchange to supplement operating funds.

-- The Shanghai securities regulator said five foreign banks, including Standard Chartered, have applied for licences to distribute mutual fund products in China.

CHINA SECURITIES JOURNAL

-- The Shanghai stock exchange is looking to invest more in regional stock exchanges to support smaller firms in China, its director general said on Monday.

CHINA DAILY

-- China's first special envoy for Asian affairs will have a focus on Myanmar, the Foreign Ministry said on Monday. There has been tension between China and its southern neighbour over conflict in Myanmar, close to the Chinese border.

-- Roughly one in ten of the 5,000 proposals submitted to China's top political advisory body since March 3 are related to environmental issues, said Lu Fuhe, a top national political advisor.

SHANGHAI DAILY

-- French firm Carrefour, the world's number two retailer, has implemented a system to allow shoppers to trace the origin of fruit and vegetables in their Chinese stores in Shanghai, a reflection of the recent pressure in China over food safety.

CHINA BUSINESS NEWS

-- The number of dead pigs found in the Huangpu River, one of Shanghai's key water sources, is now estimated to have increased to 2,800.

Fly On The Wall 7:00 AM Market Snapshot

ANALYST RESEARCH

Upgrades

Axiall (AXLL) upgraded to Buy from Neutral at Citigroup
Dick's Sporting (DKS) upgraded to Outperform from Market Perform at BMO Capital
Dick's Sporting (DKS) upgraded to Conviction Buy from Buy at Goldman
Intercontinental Hotels (IHG) upgraded to Neutral from Sell at UBS
Mosaic (MOS) upgraded to Outperform from Market Perform at BMO Capital
Sherwin-Williams (SHW) upgraded to Neutral from Underperform at Credit Suisse
Vantiv (VNTV) upgraded to Outperform from Market Perform at Raymond James
Vitamin Shoppe (VSI) upgraded to Buy from Neutral at Goldman

Downgrades

CVS Caremark (CVS) downgraded to Neutral from Buy at Goldman
EverBank Financial (EVER) downgraded to Neutral from Buy at Sterne Agee
RadioShack (RSH) downgraded to Sell from Neutral at Goldman
Red Hat (RHT) downgraded to Neutral from Buy at Citigroup

Initiations

Fifth & Pacific (FNP) initiated with a Buy at Brean Capital
Rush Enterprises (RUSHA) initiated with a Market Perform at BMO Capital
TJX (TJX) initiated with an Overweight at Barclays
Wabash (WNC) initiated with an Outperform at BMO Capital
WABCO (WBC) initiated with an Outperform at BMO Capital
Xoom (XOOM) initiated with an Outperform at RW Baird
Xoom (XOOM) initiated with an Overweight at Barclays

HOT STOCKS

SEC charged Illinois for misleading pension disclosures
Treasury Department sold $489.9M of GM (GM) common stock in February
HP (HPQ) disclosed U.K Serious Fraud Office opened investigation related to Autonomy
KKR (KKR) has considered teaming to bid for Life Technologies (LIFE), and Thermo Fisher (TMO) and Danaher (DHR) also weigh bids for Life, valued at $12.5B with debt, DJ reports
Diamond Foods (DMND) sees second half sales down more than first half
Rio Tinto (RIO) slowed Guinea iron ore investment, to cut staff, Reuters reports
Said Guinea iron ore project not frozen, to work with government on funding, Bloomberg reports
Hill International (HIL) sees FY13 consulting fee revenue $500M-$520M
Cadence Design (CDNS) acquired Tensilica for $380M in cash
Pall Corp (PLL) signed 30 year agreement to supply Embraer (ERJ) with KC-390 manifolds
MRC Global (MRC), NAWAH entered into alliance to open distribution facility in Iraq
Lakeland Industries (LAKE) reported $11.5M goodwill impairment charge in Brazil

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
Costco (COST), BioScrip (BIOS), Stewart Enterprises (STEI), XenoPort (XNPT), Heckmann (HEK)

Companies that missed consensus earnings expectations include:
Stage Stores (SSI), FuelCell (FCEL), Chiquita Brands (CQB), Hill International (HIL), Casey's General Stores (CASY), Urban Outfitters (URBN)

Companies that matched consensus earnings expectations include:
Douglas Dynamics (PLOW), Flow International (FLOW), Manitex (MNTX)

NEWSPAPERS/WEBSITES

  • Multinationals (GE, HPQ, CAT, HON) have been increasing their footprint in Asia for years as they have moved from selling into the region to also investing here. But the transformation is gaining critical mass as Western companies' market-share leads in Asia over cash-flush local competitors narrow, forcing Western firms to invest more, tailor their products and transfer top executives to Asia, the Wall Street Journal reports
  • Rising fuel prices have GM (GM) and Chrysler Group (FIATY) taking another look at selling smaller pickup trucks—vehicles that the Detroit Three automakers (F) abandoned in the U.S. amid weak demand. Both see the vehicles helping them to hit higher fuel-economy targets and to regain market share from Toyota (TM), the current top-selling small hauler., the Wall Street Journal reports
  • Two groups of AIG (AIG) shareholders won class-action status from a federal judge on in a $25B lawsuit by former CEO Maurice "Hank" Greenberg over alleged losses caused by the U.S. government's bailout of the insurer, Reuters reports
  • As the jobs market showing signs of healing, economists think they know what's next for monetary policy: the Fed will at some point reduce its monthly bond purchases, and soon after, end them altogether. But perhaps they shouldn't be so sure, Reuters reports
  • Shares of companies that own and operate their truck fleets (WERN, KNX, SWFT, HTLD) are outperforming those that act as brokers for trucking services, driven by stronger U.S. freight activity, Bloomberg reports
  • The Treasury Department, exiting its ownership stake in GM (GM), accelerated its sell- down of the automaker in February, saying it received $489.9M in proceeds from the sale of common shares, Bloomberg reports

SYNDICATE

Emeritus (ESC) announces 7.97M share secondary offering by holders
Government Properties (GOV) 9.95M share Spot Secondary priced at $25.20
HeartWare (HTWR) announces public offering of 1.5M shares of common stock
Lexington Realty (LXP) files to sell 15M shares of common stock
Salesforce.com (CRM) announces proposed $1B offering of convertible senior notes
Sapiens (SPNS) files to sell $40M of common stock, 6M shares for holders
Sun Communities (SUI) announces 4.5M share common stock offering
U.S. Silica (SLCA) announces 8.5M share secondary offering by stockholder
Yandex (YNDX) announces 24.25M Class A ordinary shares offering by holders

Your rating: None Average: 5 (1 vote)

Mehdi’s Morning Memo: Mansion Mischief

The ten thing you need to know on Tuesday 12 March 2013...

1) MANSION MISCHIEF

“Playing parliamentary silly buggers” is how one Lib Dem MP described the Labour motion on the mansion tax to us, as Nick Clegg and David Cameron agreed a government amendment that both coalition parties could sign up to. The deal, which makes it clear the Lib Dems support a new levy on homes over £2m while the Tories do not, saves the PM and DPM the awkwardness of a coalition split over the issue.

Labour had mischievously tabled today’s debate in an attempt to either divide the coalition, or force Lib Dem MPs to vote against their own policy. Both of which would be a good laugh for Ed Miliband and Ed Balls. Expect Opposition MPs to have a lot of fun at the Lib Dems expense during this afternoon’s Commons debate. Or rather, more so than usual.

Today's Memo is edited by Ned Simons as Mehdi Hasan is in Rome helping to choose the new Pope.

2) THE (OTHER SORT OF) BIG HOUSE

Chris Huhne meanwhile is swapping his mansion for the other sort of big house today, after being sentenced to eight months in jail. “Well, I certainly lied and lied again,” the former energy secretary told Channel 4 News. "I think my political career is very clearly over but I think that I have other things to offer, doing other things, and I will.”

It’s not all bad for Huhne, his former colleague on the Lib Dem benches, Lembit Opik, has offered to visit him in prison – perhaps seeking a captive audience for his stand-up routine. Surely Huhne has suffered enough?

3) WHO ARE THE 0.2%?

A total of 1,513 votes were cast in the Falklands referendum, with 98.8% of the islanders declaring themselves in favour of remaining British. Just three votes, or 0.2% of the ballot, voted against. There will no doubt be a witch-hunt to find out who the hell those three people were.

William Hague welcomed the utterly unsurprising vote, saying: “We have always been clear that we believe in the rights of the Falklands people to determine their own futures and to decide on the path they wish to take. It is only right that, in the twenty-first century, these rights are respected.

“All countries should accept the results of this referendum and support the Falkland Islanders as they continue to develop their home and their economy. I wish them every success in doing so.”

This morning David Cameron said Argentina should "should take careful note of this result". No word on which way all the penguins voted.

4) THE RYAN PLAN

WASHINGTON - Under the splash headline ‘Austerity Now’ (that pun is so 2010 guys, we’ve used it at least five times, keep up) our American colleagues report that former Republican vice-presidential candidate and chairman of the House Budget Committee Chairman, Paul Ryan, said on Monday he can balance the US federal budget in 10 years without raising taxes any further by achieving $4.6 trillion in additional government spending cuts.

5) CAMERON ‘QUIZZED’

David Cameron will be at the liaison committee at 4pm this afternoon for 90 (it will seem longer) minutes. The format of the sessions, where the chairman of the different Commons select committees each get to question the prime minister means they are about as forensic as yesterday’s PM Direct event where Cameron had to resort to asking himself questions as none were forthcoming from the audience.

Pity the poor aides and journalists who get stuck in camera shot behind the prime minister and have to avoid nodding off live on Sky News (for as long as the broadcasters can bare to cover it that is).

6) POLL ‘BOOSTS’ TORY RIGHT

A Guardian/ICM poll has found that public “overwhelmingly believes a hard line on Europe, immigration and traditional families would make the party more appealing”.

According to the paper by a majority of 67%-25%, voters say, "the Conservatives would be more appealing if they took a tougher line with Europe". Some 75%-21% believe the same about the party taking a "a tougher line on immigration. And voters judge by 69%-24% that the Tories' appeal could be boosted by keeping "themselves on the side of traditional families" – in what will be read as a rejection of gay marriage.

The findings will be seized upon by Tory MPs who believe the key to electoral success in 2015 is to abandon Cameron’s modernising agenda and move to the right to take-on Ukip.

7) TAXI!

The Evening Standard reports that Lutfur Rahman, the mayor of Tower Hamlets in East London, has charged a series of mysteriously expensive taxi journeys to the public. One trip is said to have cost £71 despite the cab only travelling a distance of 400 metres. Another cost £121 when the same journey taken on the capital’s Docklands Light Railway would have cost just £2.10.

8) IRISH ASK UK TO STAY

Irish premier Enda Kenny has become the latest European leader to urge Britain to remain within the European Union. The Taoiseach, in London for a series of engagements including talks with Cameron, insisted Britain has much to gain from its membership.

"We see the British relationship with the EU as being a two-way relationship - Britain benefits from its membership of the EU, and the EU is better off with Britain as a leading member making a valued contribution," Kenny said.

9) NEW POPE TIME

From the BBC: "Cardinals gathered in Rome to elect a new pope will begin voting later on Tuesday, with no clear frontrunner in sight. The 115 cardinal-electors will attend a special Mass in the morning before processing into the Sistine Chapel to begin their deliberations in the afternoon. They will vote four times daily until two-thirds can agree on a candidate."

10) DRONE WARS

WASHINGTON - A new medal that would honor drone pilots and cyber warriors and outrank battlefield combat medals such as the Purple Heart and Bronze Star is facing backlash from veterans organizations and members of Congress, with a bipartisan group of 22 senators pressing the Pentagon to change the designation. As HuffPost reports, the backlash to the medal centers around the fact that it will take precedence over traditional several combat awards, which require that the recipient risk his or her life in order to receive them.

140 CHARACTERS OR LESS

@Queen_UK Queen of the Falklands. By popular consent. #YourQueenLovesYou #DontCryForOneArgentina

@Mike_Fabricant At the request of a Minister in charge of the legislation last night, I have changed my photo back to the pony.

900 WORDS OR MORE

Steve Richards in The Independent: "Labour and the Tories both think they'll lose 2015 and they can't both be right."

Benedict Brogan in the Daily Telegraph:"If Cameron wants his troops to rally, he must act like a general."

Mehdi Hasan in The Huffington Post UK: "Get Rid Of Dave? How Exactly Would That Help the Tories?"

Got something you want to share? Please send any stories/tips/quotes/pix/plugs/gossip to Mehdi Hasan (mehdi.hasan@huffingtonpost.com) or Ned Simons (ned.simons@huffingtonpost.com). You can also follow us on Twitter: @mehdirhasan, @nedsimons and @huffpostukpol

On the News With Thom Hartmann: 200,000 Taiwanese Publicly Protested Nuclear Power on Saturday,...

In today's On the News segment: Legislation that would penalize employers for lockouts in labor disputes introduced in Minnesota, and more.

Thom Hartmann here – on the news...

You need to know this. Republicans hate tax increases... unless they're part of Paul Ryan's budget plan. Six hundred billion dollars in new revenue, fought for by President Obama and opposed by Congressional Republicans, is just one of the many surprises in Paul Ryan's new GOP budget. According to Republican Representative Jason Chaffetz, new revenue generated from ending the Bush tax cuts for the very wealthy is included in the GOP plan because Republicans lost on the tax issue. Despite their doomsday predictions that Obama's tax plan would crush so-called job-creators and harm the economy, Republicans are now happy to make them part of the Paul Ryan budget. In prior years, when Democrats projected $600 billion in savings from decreased war spending, Paul Ryan dismissed the idea as "phantom savings" - yet now he has those very same projections as part of his own budget proposal. Despite incorporating multiple Obama policies in their budget, don't think Republicans are giving up on their austerity measures just yet. In typical GOP fashion, Ryan's budget calls for huge cuts to vital social service programs, like food stamps, job training, Medicare, and Medicaid. And just in case those cuts wouldn't be painful enough, Ryan's entire budget hinges on the repeal of Obamacare. Without defunding healthcare for millions of Americans, his numbers don't add up. Considering the fact that Obama has repeatedly said he would veto any attempt to repeal the Affordable Care Act, and Democrats in the Senate would block any such legislation, we can only conclude that Paul Ryan knows his budget is doomed to fail. It's clear that Republicans have no intention of working with the President to negotiate an honest, realistic budget plan. Ryan's budget is a farce, aimed at scoring political points with the tea party base, rather than helping the American people .

In screwed news... The U.S. Government has notified 60,000 border security workers that they will soon face furloughs because of Republican austerity measures. Customs and Border Protection must cut $754 million from it's budget by September 30th, meaning international travelers can expect longer lines at airports, huge delays at ports, and fewer border patrol officers at international checkpoints. The agency aims to reduce spending through furloughs, a hiring freeze, reductions in overtime hours, and reduced levels of training. Homeland Security Secretary Janet Napolitano expects customs wait times to increase by 150-200%, and she said, "I don't mean to scare, I mean to inform. If you're traveling, get to the airport earlier than you otherwise would. There's only so much we can do with personnel." Despite GOP claims that they favor strong boarder security, tax break security for millionaires and billionaires appears to mean even more to them. Republican obstinacy on the sequester is putting our national security in jeopardy, just to be sure their rich buddies never have to pay their fair share.

In the best of the rest of the news...

In Minnesota, employers may have to think twice about using worker lockouts during labor disputes. Lockouts have long been a common employer tactic in Minnesota, but state Representative Joe Atkins has introduced legislation to protect workers, and charge employers a penalty for keeping employees from their jobs. The Employer Lockout Accountability Act has bipartisan support in the Minnesota state legislature, and grew out of the American Crystal Sugar lockout, which has been ongoing since August of 2011. The Minnesota AFL-CIO has expressed support for the legislation, saying that the impact of lockouts stretches well beyond those who are kept from work. The AFL-CIO secretary-treasurer, Steve Hunter, said, "there's a community effect beyond just the workers themselves, and we thank that, by ensuring some economic security for those workers, we can help mitigate those community effects as well." With our right to organize being attacked in so many states throughout our nation, it's nice to see Rep. Atkins working to protect unionized workers in Minnesota.

On Saturday, 200,000 people took to the streets of Taiwan to protest nuclear power. Just two days before the two year anniversary of the meltdown of Japan's Fukushima nuclear power plant, protesters demanded their government stop allocating funding for a fourth nuclear power plant in New Taipei City. More than 6.5 million people live in close proximity to the plant, which is scheduled to be completed later this year – after 14 years of construction and about $10 billion of taxpayer money. One organizer in the protest said, "we have to take to the streets for the good of the next generation." After disasters like Chernobyl and Fukushima, it's easy to understand how dangerous nuclear energy is. Let's join with the 200,000 protesters in Taiwan, and take a stand for the good of the next generation of Americans too. No nukes!

Despite the flurry of people rushing out to buy assault weapons, and reports of empty shelves at gun stores, fewer Americans are purchasing guns. According to new data from the General Social Survey, people who already own guns are simply buying more. While 50% of households owned guns in the 1970's, only 34% reported guns in the home by 2012. Addressing the record sales levels at gun stores, Daniel Webster, the director of the Johns Hopkins Center for Gun Policy and Research, said, "I suspect the increase in gun sales has been limited mostly to current gun owners." If the NRA and it's fellow gun-nuts hadn't blocked commonsense regulations like a national gun registry, we could verify this data. Let's keep pushing Congress to enact some real gun reforms, before the gun-nuts have a chance to hoard any more fire power.

And finally... On Saturday, bikers in San Francisco bared it all for the environment. Protestors of all shapes and sizes came out in the buff to take part in the World Naked Bike Ride, which is an international demonstration against our dependence on fossil fuels. Riders were warned that a new law prohibited public nudity, but risked citations to bring attention to this important cause. Although this type of protest may not be for everyone, we applaud those brave enough to bare all for green energy. And we hope they remembered the sun block.

And that's the way it is today – Monday, March 11, 2013. I'm Thom Hartmann – on the news.

5 Ways Privatization Is Poisoning America

We all live better lives when the common good is not for sale.

March 10, 2013  |  

Like this article?

Join our email list:

Stay up to date with the latest headlines via email.

It gets more maddening every day. Essential human needs are being packaged into products to be bought and sold. The right to food and water, education, health care, public spaces, and unrestricted speech shouldn't be based on who can pay the most, or on who can generate profits with the slickest marketing pitch.

The free-market capitalism that drives our economy is a doctrine of individuals pursuing profit. Nothing else matters. An executive for Roche, a healthcare company, said "We are not in the business to save lives, but to make money."

With privatization of the common good we risk losing both our heritage and our humanness.

1. The Taking of Public Land

Attempts to privatize federal land were made by the  Reagan administration in the 1980s and the Republican-controlled  Congress in the 1990s. In 2006, President Bush proposed  auctioning off 300,000 acres of national forest in 41 states.

The assault on our common areas continues with even greater ferocity today, as the euphemistic  Path to Prosperity has proposed to sell millions of acres of "unneeded federal land," and  libertarian groups like the  Cato Institute demand that our property be "allocated to the highest-value use." Mitt Romney admitted that he didn't know "what the purpose is" of public lands.

Examples of the takeaway are shocking.  Peabody Coal is strip-mining public lands in Wyoming and Montana and making a 10,000% profit on the meager amounts they pay for the privilege.  Sealaska is snatching up timberland in Alaska. The  Central Rockies Land Exchange would allow Bill Koch to pick up choice Colorado properties from the Bureau of Land Management, while neighboring Utah Governor Gary Herbert sees  land privatization as a way to reduce the deficit. Representative Cliff Stearns recommended that we  "sell off some of our national parks." One gold mining company even  invoked an 1872 law to grab mineral-rich Nevada land for which it stands to make a  million-percent profit.

The National Resources Defense Council just reported that oil and gas companies hold drilling and fracking rights on U.S. land equivalent to the size of California and Florida combined. Much of this land is "split estate," which means the company can drill under an American citizen's property without consent. Unrestrained by government regulations, TransCanada was able to use  eminent domain in Texas to lay its pipeline on private property and then have the owner arrested for trespassing on her own land, and  Chesapeake Energy Corporation overturned a 93-year-old law to frack a Texas residence without paying a penny to the homeowners. Most recently, the  oil frenzy in North Dakota has cheated Native Americans out of a billion dollars worth of revenue from drilling leases.

Away from the mountains and the plains, back in the cities of  Chicago and Indianapolis and L.A. and San Diego, our streets and parking spaces have been surrendered to corporations until the time of our great-grandchildren, with some of the  highest profit margins in the corporate world.

2. Water for Sale

The corporate invasion of the water market is well underway. In May 2000  Fortune Magazine called water "one of the world's great business opportunities..[It] promises to be to the 21st century what oil was to the 20th." Citigroup is on board, viewing water as a prime  investment, and perhaps the "single most important physical-commodity based asset class."

The vital human resource of water is being privatized and marketed  all over the country. In Pennsylvania and  California, the American Water Company took over towns and raised rates by 70% or more. In  Atlanta, United Water Services demanded more money from the city while prompting federal complaints about water quality. Shell owns  groundwater rights in Colorado, oil tycoon T. Boone Pickens is  buying up the water in drought-stricken Texas, and water in  Alaska is being pumped into tankers and sold in the Middle East.

A 2009 analysis of water and sewer utilities by Food and Water Watch  found that private companies charge up to 80 percent more for water and 100 percent more for sewer services. Various privatization abusesor failures occurred in California, Georgia, Illinois, Indiana, New Jersey, and Rhode Island.

Of course, water monopolization is a global concern, and a life-threatening issue in undeveloped countries, where  884 million people are without safe drinking water and more than 2.6 billion people lack the means for basic sanitation. Whether in the U.S. or in the world's poorest nation, the folly of privatizing water is made clear by the  profit-seeking motives of business:

(1) Water corporations are primarily accountable to their stockholders, not to the people they serve.
(2) They will avoid serving low-income communities where bill collection might be an issue.
(3) Because of the risk to profits, there is less incentive to maintain infrastructure.

3. Owning Human Life

Monsanto and their agro-chemical partners call themselves the "life industry."

In 1980 a General Electric geneticist  engineered an oil-eating bacterium, effective against oil spills, and in the first case of its kind the Supreme Court ruled that "a live, human-made micro-organism is patentable subject matter." Fifteen years later a  World Trade Organization decision allowed plants, genes, and microorganisms to be owned as  intellectual property.

The results, not surprisingly, have been disastrous. One-fifth of the  human genome is privately owned through patents. Strains of influenza and hepatitis have been  claimed by corporate and university labs, and because of this researchers can't use the patented life forms to perform cancer research. Thus the cost of life-preserving tests often depends on the whim (and the market analysis) of the organization claiming ownership of the biological entity.

The results have also been otherworldly. In 1996 the U.S. National Institutes of Health attempted to  patent the blood cells of the primitive Hagahai tribesman of New Guinea. U.S. companies AgriDyne and W.R. Grace tried to gain  ownership of the neem plant, used for centuries in India for the making of medicines and natural pesticides. Other examples of  'biopiracy': The University of Cincinnati holds a patent on Brazil's guarana seed; the University of Mississippi holds a patent on the Asian spice turmeric.

Most tragically, tens of thousands of  Indian farmers, charged for seeds that they used to develop on their own, and forced to repurchase them every year, have been driven to suicide after experiencing crop failures and ruinous debt.

Monsanto is at the forefront of GMO seeds and litigation against vulnerable farmers. To date the company has won over half of its  patent infringement lawsuits. The Supreme Court is currently weighing the arguments in  Bowman vs. Monsanto, which asks if a company can have a claim on a farmer whose crops were derived from a seed already paid for. More significantly, the question is whether a company can claim the rights to a form of life that has been nurtured by communities of farmers for centuries.

4. Owning the Air

In polluted Beijing, wealthy entrepreneur  Chen Guangbiao is selling "fresh air" in a soft drink can for about 80 cents.

While Americans are not yet dependent on (real or imagined) breathing supplements, we have relinquished public access to the air in another important way: the  1996 Telecommunications Act led the way to a giveaway of the transmission airwaves to the broadcast media. Through an effective lobbying campaign the communications industry gained all the benefits of a lucrative public space without even a licensing fee. Objected  former Senate Majority Leader Bob Dole, "The airwaves are a natural resource. They do not belong to the broadcasters, phone companies or any other industry. They belong to the American people."

Closely related is our right to freedom of expression on the Internet, which has been repeatedly threatened, despite the presence of existing copyright laws, by aggressive proposals like the  Stop Online Piracy Act (SOPA) and the Protect IP Act (PIPA). Privacy is at risk with the  Cyber Intelligence Sharing and Protection Act (CISPA), passed in the House despite objections by Ron Paul and others who recognize the "Big Brother" implications of government monitoring of Google and Facebook accounts. The  Foreign Intelligence Surveillance Act has facilitated the monitoring of foreign communications in the name of anti-terrorism.

A 2011  UNESCO report offered this worrisome insight: "..the control of information on the Internet and Web is certainly feasible, and technological advances do not therefore guarantee greater freedom of speech."

5. Children as Products

Leading capitalists like Bill Gates and Jeb Bush and Michael Bloomberg and Arne Duncan and Michelle Rhee, who together have a  few months teaching experience, have decided that the business model can pump out improved assembly line versions of our children.

Charter schools simply don't work as well as the profitseekers would have us believe. The recently updated  CREDO study at Stanford concluded again that "CMOs (Charter Management Organizations) on average are not dramatically better than non-CMO schools in terms of their contributions to student learning." Approximately the same percentages of charters and non-charters are showing improvement (or lack of improvement) in reading and math. In addition, poorly performing charters tend not to improve over time.

Nevertheless, charters remain appealing to poorly informed parents. The schools like to represent themselves as equal opportunity educational options, but the facts state the opposite, as many of them have  strict application standards that ensure access to the most qualified students. Funding for such schools drains money out of the public system.

Children are viewed as products in another way -- on the  school-to-prison pipeline. Many school districts employ "school resource officers" to patrol their hallways, and to ticket or arrest kids who disrupt the academic routine, no matter the age of the offender or the nature of the "offense":

-- A twelve-year-old was  arrested for wearing too much perfume.
-- A five-year-old was  handcuffed for committing "battery" on a police officer.
-- A six-year-old was called a  "terrorist threat" for talking about shooting bubbles at a classmate.

Along with these bizarre instances is the frightening precedent set by a private prison, Corrections Corporation of America, which despite having no law enforcement authority was allowed to  participate in a drug sweep at a high school in Arizona.

An Antidote?

A successful society doesn't derive from a few Ayn-Rand-type individuals. It's the other way around, as philosopher  John Dewey reasoned in the 1930s. It's easy to forget that our country's greatest success was due to a collaborative effort in the years during and after World War 2, when advances in manufacturing and technology made us the strongest economy the world had ever seen. It was a shared success. The common good was not for sale.

Cable Calls For Investment, Not Cuts, At Lib Dem Conference

Vince Cable renewed his call for billions of pounds more infrastructure investment funded by higher borrowing, saying the Government had to "really get moving", at the Lib Dem Party Conference in Brighton.

The Business Secretary admitted there were dangers in pushing up the Government's debt in an effort to kickstart the economy but he insisted the "balance of risks" seemed to be changing and ministers had to be "open minded".

He also warned that Liberal Democrats would block any effort to cut crucial spending in areas such as science and skills, and said Tory efforts to reduce immigration were harming the economy.

The intervention came at a fringe event at the party's spring conference in Brighton. Kicking off the gathering on Friday, Nick Clegg denied the Lib Dems were in crisis in the wake of sexual harassment allegations and the conviction of ex-Cabinet minister Chris Huhne.

However, the Deputy Prime Minster conceded the party had "let people down" and needed to take a "long, hard look in the mirror".

Both David Cameron and Clegg dismissed the prospect of increasing borrowing to fund more capital investment earlier this week after Cable floated the prospect in a pre-Budget essay in the New Statesman.

nick clegg

Nick Clegg at the Spring Conference in Brighton

However, Cable made light of the reaction last night, saying he noted the markets had not "collapsed" as a result.

"The point I was trying to make is that we need to be open minded and recognise that the balance of these risks may well be changing," he said.

Cable said the decision by the former Labour government to cut capital investment had been a major policy error.

He pointed out that a £15 billion increase in capital spending would restore it to peak levels - although he stressed the figure was "illustrative".

He added: "That's a useful figure, but I am not specifically recommending that."

Cable said he was on the "same page" as the Prime Minister, "but we have different emphasises and we use different language".

While Cameron used phrases like "trees don't produce money", he preferred to say there was "no such thing as a free lunch".

"There are risks in any policy option we care to take," he said.

"But nonetheless the conclusion I have drawn is that we have to look at how we can really get moving with investment in infrastructure and housing."

vince cable

Cable insisted increased capital spending would boost the economy

Cable has been listed with Tories Eric Pickles, Theresa May and Philip Hammond among ministers who are resisting further spending cuts but he insisted he did not "need lectures" about the importance of managing public finances.

But he criticised some on the Tory right for waging "jihad" on state spending and warned it would be "utterly counterproductive" to cut science and skills budgets any further. "Lib Dems in government will not allow that to happen," he added.

The Cabinet minister also attacked the Tory drive to reduce net annual immigration to tens of thousands, complaining that the Lib Dems were having to "live with" it.

"It is politically ineffective and it is causing a great deal of economic damage," he added, indicating that Mr Clegg would be making a speech on the issue.

Cable insisted more of the money needed to fill the deficit should be raised from taxes, rather than spending cuts.

He said the current ratio of spending cuts to tax rises was 80-20 or 85-15, and urged the introduction of measures such as the mansion tax, as well as a crackdown on long-term "non dom" residents.

"I think our view as a party must be that there has got to be a better balance between spending cuts and taxation," he said.

Party president Tim Farron will formally open the conference on Saturday morning, before a speech by former leader Lord Ashdown. Clegg is due to do a question and answer session with activists later.

READ MORE:

It’s A Trap! Labour Hope To Split Coalition With Mansion Tax Vote

The Labour Party has set a trap for the Lib Dems, they know it and may be willing to fall in.

Next week the House of Commons will vote on whether there should be a 'Mansion Tax' - a levy placed on homes worth over £2m designed to bring "fairness" to the tax system. It is a signature Lib Dem policy that the deputy prime minister has thus far been unable to convince George Osborne to include in his Budgets.

Always keen to cause mischief by exposing splits in the coalition, Ed Miliband and Ed Balls decided to borrow the policy and then use an Opposition Day debate in the Commons to put it to a, purely symbolic, vote on Tuesday. The scamps.

LIKE HUFFPOST UK POLITICS ON FACEBOOK | FOLLOW US ON TWITTER

Chris Leslie MP, Labour's shadow financial secretary to the Treasury, said the vote was "a chance for the Liberal Democrats to finally vote for something that was in their manifesto".

The full text of the motion is:

“That this House believes that a mansion tax on properties worth over £2million, to fund a tax cut for millions of people on middle and low incomes, should be part of a fair tax system and calls on the Government to bring forward proposals at the earliest opportunity”.

The vote is win-win for Labour. Should the Lib Dems decide to make a stand and support the motion, which after all was their policy in the first place, Miliband can claim to have split the coalition on a hugely symbolic issue.

But if the junior coalition partner decides to stick with the Tories and vote down the motion, it allows Labour to attack them for abandoning their principles.

It is not a problem lost on the Lib Dem leadership. Tim Farron, the party president, said in an interview with The House magazine on Thursday he had yet to make up his mind. "They’ve [Labour] been opportunistic, they’ve been mischievous. That doesn’t mean we shouldn’t consider it as an opportunity," he said.

Business secretary Vince Cable, who has vocally advocated for a Mansion Tax both inside cabinet and in public, has said he would not rule out voting with Labour.

And ahead of the Eastleigh by-election, Nick Clegg said David Cameron was "stuck in the past" in his opposition to a Mansion Tax.

In preparation for the Tuesday's Commons debate Balls will no doubt have a stack of Lib Dem quotes backing the tax piled high on his desk.

Of couse there is another problem for the Lib Dems. If they vote in favour of a symbolic motion calling for a Mansion Tax but fail to secure its actual introduction in the Budget - which Cameron has ruled out - Labour can easily ask what the point is of the Lib Dems being in government.

Also on HuffPost:

David Cameron Reprimanded For Making Misleading Economy Claim, Again

David Cameron has been rebuked for giving a misleading account of his government's economic record, after he claimed the Office for Budget Responsibility (OBR) has said austerity measures were not to blame for the lack of growth.

Yesterday the prime minister delivered a pre-Budget speech in which he insisted the government would not abandon its current economic plan. He lay the blame for the country's economic woes on global factors rather than the policies of the Treasury since 2010.

"As the independent Office for Budget Responsibility has made clear growth has been depressed by the financial crisis, the problems in the Eurozone and a 60 per cent rise in oil prices between August 2010 and April 2011," he said.

"They are absolutely clear that the deficit reduction plan is not responsible. In fact, quite the opposite."

However on Friday Robert Chote, the chairman of the OBR, has wrote to Cameron to complain this was misleading.

"For the avoidance of doubt, I think it is important to point out that every forecast published by the OBR since the June 2010 Budget has incorporated the widely held assumption that tax increases and spending cuts reduce economic growth in the short term, " he said.

LIKE HUFFPOST UK POLITICS ON FACEBOOK | FOLLOW US ON TWITTER

Chote said economic growth "has been much weaker since the end of 2010 than we and most other forecasters expected in June 2010" and that it was "clearly possible" that it was in part due to the government's austerity measures.

The OBR was set up by George Osborne in 2010 to provide independent economic growth forecasts to avoid the Treasury being accused of fixing the figures as had happened in the past.

It is not the first time the prime minister has been accused of making misleading claims about the government's economic record.

In January the UK Statistics Authority told him off for using a party political broadcast to claim that the government was "paying down Britain's debts" as the country's level of debt was actually rising.

A Downing Street spokesman said: "The OBR has today again highlighted external inflation shocks, the eurozone and financial sector difficulties as the reasons why their forecasts have come in lower than expected. That is precisely the point the prime minister was underlining."

Shadow chancellor Ed Balls said Cameron had "an obligation to be straight with people and not play fast and loose with the facts".

“This is another embarrassing rebuke for the Prime Minister, just 24 hours after his panicky and defensive speech on the economy. Deep spending cuts and tax rises have reduced economic growth, as the OBR says, and so it was deeply misleading for David Cameron to claim otherwise."

Related on HuffPost:

Mission Unaccomplished: Why the Invasion of Iraq Was the Single Worst Foreign Policy Decision...

I was there. And “there” was nowhere. And nowhere was the place to be if you wanted to see the signs of end times for the American Empire up close. It was the place to be if you wanted to see the madness -- and oh yes, it was madness -- not filtered through a complacent and sleepy media that made Washington’s war policy seem, if not sensible, at least sane and serious enough. I stood at Ground Zero of what was intended to be the new centerpiece for a Pax Americana in the Greater Middle East.

Not to put too fine a point on it, but the invasion of Iraq turned out to be a joke. Not for the Iraqis, of course, and not for American soldiers, and not the ha-ha sort of joke either. And here’s the saddest truth of all: on March 20th as we mark the 10th anniversary of the invasion from hell, we still don’t get it. In case you want to jump to the punch line, though, it’s this: by invading Iraq, the U.S. did more to destabilize the Middle East than we could possibly have imagined at the time. And we -- and so many others -- will pay the price for it for a long, long time.

The Madness of King George

It’s easy to forget just how normal the madness looked back then. By 2009, when I arrived in Iraq, we were already at the last-gasp moment when it came to salvaging something from what may yet be seen as the single worst foreign policy decision in American history. It was then that, as a State Department officer assigned to lead two provincial reconstruction teams in eastern Iraq, I first walked into the chicken processing plant in the middle of nowhere.

"By invading Iraq, the U.S. did more to destabilize the Middle East than we could possibly have imagined at the time. And we -- and so many others -- will pay the price for it for a long, long time."

By then, the U.S. “reconstruction” plan for that country was drowning in rivers of money foolishly spent. As the centerpiece for those American efforts -- at least after Plan A, that our invading troops would be greeted with flowers and sweets as liberators, crashed and burned -- we had managed to reconstruct nothing of significance. First conceived as a Marshall Plan for the New American Century, six long years later it had devolved into farce.

In my act of the play, the U.S. spent some $2.2 million dollars to build a huge facility in the boondocks. Ignoring the stark reality that Iraqis had raised and sold chickens locally for some 2,000 years, the U.S. decided to finance the construction of a central processing facility, have the Iraqis running the plant purchase local chickens, pluck them and slice them up with complex machinery brought in from Chicago, package the breasts and wings in plastic wrap, and then truck it all to local grocery stores. Perhaps it was the desert heat, but this made sense at the time, and the plan was supported by the Army, the State Department, and the White House.

Elegant in conception, at least to us, it failed to account for a few simple things, like a lack of regular electricity, or logistics systems to bring the chickens to and from the plant, or working capital, or... um... grocery stores. As a result, the gleaming $2.2 million plant processed no chickens. To use a few of the catchwords of that moment, it transformed nothing, empowered no one, stabilized and economically uplifted not a single Iraqi. It just sat there empty, dark, and unused in the middle of the desert. Like the chickens, we were plucked.

In keeping with the madness of the times, however, the simple fact that the plant failed to meet any of its real-world goals did not mean the project wasn't a success. In fact, the factory was a hit with the U.S. media. After all, for every propaganda-driven visit to the plant, my group stocked the place with hastily purchased chickens, geared up the machinery, and put on a dog-and-pony, er, chicken-and-rooster, show.

In the dark humor of that moment, we christened the place the Potemkin Chicken Factory. In between media and VIP visits, it sat in the dark, only to rise with the rooster’s cry each morning some camera crew came out for a visit. Our factory was thus considered a great success. Robert Ford, then at the Baghdad Embassy and now America's rugged shadow ambassador to Syria, said his visit was the best day out he enjoyed in Iraq. General Ray Odierno, then commanding all U.S. forces in Iraq, sent bloggers and camp followers to view the victory project. Some of the propaganda, which proclaimed that “teaching Iraqis methods to flourish on their own gives them the ability to provide their own stability without needing to rely on Americans,” is still online (including this charming image of American-Iraqi mentorship, a particular favorite of mine).

We weren’t stupid, mind you. In fact, we all felt smart and clever enough to learn to look the other way. The chicken plant was a funny story at first, a kind of insider’s joke you all think you know the punch line to. Hey, we wasted some money, but $2.2 million was a small amount in a war whose costs will someday be toted up in the trillions. Really, at the end of the day, what was the harm?

The harm was this: we wanted to leave Iraq (and Afghanistan) stable to advance American goals. We did so by spending our time and money on obviously pointless things, while most Iraqis lacked access to clean water, regular electricity, and medical or hospital care. Another State Department official in Iraq wrote in his weekly summary to me, “At our project ribbon-cuttings we are typically greeted now with a cursory ‘thank you,’ followed by a long list of crushing needs for essential services such as water and power.” How could we help stabilize Iraq when we acted like buffoons? As one Iraqi told me, “It is like I am standing naked in a room with a big hat on my head. Everyone comes in and helps put flowers and ribbons on my hat, but no one seems to notice that I am naked.”

By 2009, of course, it should all have been so obvious. We were no longer inside the neocon dream of unrivaled global superpowerdom, just mired in what happened to it. We were a chicken factory in the desert that no one wanted.

Time Travel to 2003

Anniversaries are times for reflection, in part because it’s often only with hindsight that we recognize the most significant moments in our lives. On the other hand, on anniversaries it’s often hard to remember what it was really like back when it all began. Amid the chaos of the Middle East today, it’s easy, for instance, to forget what things looked like as 2003 began. Afghanistan, it appeared, had been invaded and occupied quickly and cleanly, in a way the Soviets (the British, the ancient Greeks…) could never have dreamed of. Iran was frightened, seeing the mighty American military on its eastern border and soon to be on the western one as well, and was ready to deal. Syria was controlled by the stable thuggery of Bashar al-Assad and relations were so good that the U.S. was rendering terror suspects to his secret prisons for torture.

For decades to come, the U.S. will have a big enough military to ensure that our decline is slow, bloody, ugly, and reluctant, if inevitable. One day, however, even the drones will have to land.

Most of the rest of the Middle East was tucked in for a long sleep with dictators reliable enough to maintain stability. Libya was an exception, though predictions were that before too long Muammar Qaddafi would make some sort of deal. (He did.) All that was needed was a quick slash into Iraq to establish a permanent American military presence in the heart of Mesopotamia. Our future garrisons there could obviously oversee things, providing the necessary muscle to swat down any future destabilizing elements. It all made so much sense to the neocon visionaries of the early Bush years. The only thing that Washington couldn’t imagine was this: that the primary destabilizing element would be us.

Indeed, its mighty plan was disintegrating even as it was being dreamed up. In their lust for everything on no terms but their own, the Bush team missed a diplomatic opportunity with Iran that might have rendered today’s saber rattling unnecessary, even as Afghanistan fell apart and Iraq imploded. As part of the breakdown, desperate men, blindsided by history, turned up the volume on desperate measures: torture, secret gulags, rendition, drone killings, extra-constitutional actions at home. The sleaziest of deals were cut to try to salvage something, including ignoring the A.Q. Khan network of Pakistani nuclear proliferation in return for a cheesy Condi Rice-Qaddafi photo-op rapprochement in Libya.

Inside Iraq, the forces of Sunni-Shia sectarian conflict had been unleashed by the U.S. invasion. That, in turn, was creating the conditions for a proxy war between the U.S. and Iran, similar to the growing proxy war between Israel and Iran inside Lebanon (where another destabilizing event, the U.S.-sanctioned Israeli invasion of 2006, followed in hand). None of this has ever ended. Today, in fact, that proxy war has simply found a fresh host, Syria, with multiple powers using “humanitarian aid” to push and shove their Sunni and Shia avatars around.

Staggering neocon expectations, Iran emerged from the U.S. decade in Iraq economically more powerful, with sanctions-busting trade between the two neighbors now valued at some $5 billion a year and still growing. In that decade, the U.S. also managed to remove one of Iran’s strategic counterbalances, Saddam Hussein, replacing him with a government run by Nouri al-Malaki, who had once found asylum in Tehran.

Meanwhile, Turkey is now engaged in an open war with the Kurds of northern Iraq. Turkey is, of course, part of NATO, so imagine the U.S. government sitting by silently while Germany bombed Poland. To complete the circle, Iraq’s prime minister recently warned that a victory for Syria's rebels will spark sectarian wars in his own country and will create a new haven for al-Qaeda which would further destabilize the region.

Meanwhile, militarily burnt out, economically reeling from the wars in Iraq and Afghanistan, and lacking any moral standing in the Middle East post-Guantanamo and Abu Ghraib, the U.S. sat on its hands as the regional spark that came to be called the Arab Spring flickered out, to be replaced by yet more destabilization across the region. And even that hasn’t stopped Washington from pursuing the latest version of the (now-nameless) global war on terror into ever-newer regions in need of destabilization.

Having noted the ease with which a numbed American public patriotically looked the other way while our wars followed their particular paths to hell, our leaders no longer blink at the thought of sending American drones and special operations forces ever farther afield, most notably ever deeper into Africa, creating from the ashes of Iraq a frontier version of the state of perpetual war George Orwell once imagined for his dystopian novel 1984. And don’t doubt for a second that there is a direct path from the invasion of 2003 and that chicken plant to the dangerous and chaotic place that today passes for our American world.

Happy Anniversary

On this 10th anniversary of the Iraq War, Iraq itself remains, by any measure, a dangerous and unstable place. Even the usually sunny Department of State advises American travelers to Iraq that U.S. citizens “remain at risk for kidnapping... [as] numerous insurgent groups, including Al Qaida, remain active...” and notes that “State Department guidance to U.S. businesses in Iraq advises the use of Protective Security Details.”

In the bigger picture, the world is also a far more dangerous place than it was in 2003. Indeed, for the State Department, which sent me to Iraq to witness the follies of empire, the world has become ever more daunting. In 2003, at that infamous “mission accomplished” moment, only Afghanistan was on the list of overseas embassies that were considered “extreme danger posts.” Soon enough, however, Iraq and Pakistan were added. Today, Yemen and Libya, once boring but secure outposts for State’s officials, now fall into the same category.

Other places once considered safe for diplomats and their families such as Syria and Mali have been evacuated and have no American diplomatic presence at all. Even sleepy Tunisia, once calm enough that the State Department had its Arabic language school there, is now on reduced staff with no diplomatic family members resident. Egypt teeters.

The Iranian leadership watched carefully as the American imperial version of Iraq collapsed, concluded that Washington was a paper tiger, backed away from initial offers to talk over contested issues, and instead (at least for a while) doubled-down on achieving nuclear breakout capacity, aided by the past work of that same A.Q. Khan network. North Korea, another A.Q. Khan beneficiary, followed the same pivot ever farther from Washington, while it became a genuine nuclear power. Its neighbor China pursued its own path of economic dominance, while helping to “pay” for the Iraq War by becoming the number-one holder of U.S. debt among foreign governments. It now owns more than 21% of the U.S. debt held overseas.

And don’t put away the joke book just yet. Subbing as apologist-in-chief for an absent George W. Bush and the top officials of his administration on this 10th anniversary, former British Prime Minister Tony Blair recently reminded us that there is more on the horizon. Conceding that he had “long since given up trying to persuade people Iraq was the right decision,” Blair added that new crises are looming. “You’ve got one in Syria right now, you’ve got one in Iran to come,” he said. “We are in the middle of this struggle, it is going to take a generation, it is going to be very arduous and difficult. But I think we are making a mistake, a profound error, if we think we can stay out of that struggle.”

Think of his comment as a warning. Having somehow turned much of Islam into a foe, Washington has essentially assured itself of never-ending crises that it stands no chance whatsoever of winning. In this sense, Iraq was not an aberration, but the historic zenith and nadir for a way of thinking that is only now slowing waning. For decades to come, the U.S. will have a big enough military to ensure that our decline is slow, bloody, ugly, and reluctant, if inevitable. One day, however, even the drones will have to land.

And so, happy 10th anniversary, Iraq War! A decade after the invasion, a chaotic and unstable Middle East is the unfinished legacy of our invasion. I guess the joke is on us after all, though no one is laughing.

© 2013 Peter Van Buren

Peter Van Buren

Peter Van Buren spent a year in Iraq as a State Department Foreign Service Officer serving as Team Leader for two Provincial Reconstruction Teams (PRTs). Now in Washington, he writes about Iraq and the Middle East at his blog, We Meant Well. His new book is We Meant Well: How I Helped Lose the Battle for the Hearts and Minds of the Iraqi People (The American Empire Project, Metropolitan Books).

Quantitative Easing (QE) for the People: Comedian Grillo’s Populist Plan for Italy

Beppe-Grillo-e1361568756286

Default on the public debt, nationalization of the banks, and a citizen dividend could actually save the Italian economy.

Comedian Beppe Grillo was surprised himself when his Five Star Movement got 8.7 million votes in the Italian general election of February 24-25th.  His movement is now the biggest single party in the chamber of deputies, says The Guardian, which makes him “a kingmaker in a hung parliament.”

Grillo’s is the party of “no.” In a candidacy based on satire, he organized an annual “V‑Day Celebration,” the “V” standing for vaffanculo (“f—k off”).  He rejects the status quo—all the existing parties and their monopoly control of politics, jobs, and financing—and seeks a referendum on all international treaties, including NATO membership, free trade agreements and the Euro.

“If we get into parliament,” says Grillo, “we would bring the old system down, not because we would enjoy doing so but because the system is rotten.” Critics fear, and supporters hope, that if his party succeeds, it could break the Euro system.

But being against everything, says Mike Whitney in Counterpunch, is not a platform:

To govern, one needs ideas and a strategy for implementing those ideas. Grillo’s team has neither. They are defined more in terms of the things they are against than things they are for. It’s fine to want to “throw the bums out”, but that won’t put people back to work or boost growth or end the slump. Without a coherent plan to govern, M5S could end up in the political trash heap, along with their right-wing predecessors, the Tea Party.

Steve Colatrella, who lives in Italy and also has an article in Counterpunch on the Grillo phenomenon, has a different take on the surprise win. He says Grillo does have a platform of positive proposals. Besides rejecting all the existing parties and treaties, Grillo’s program includes the following:

  • unilateral default on the public debt;
  • nationalization of the banks; and
  • a guaranteed “citizenship” income of 1000 euros a month.

It is a platform that could actually work. Austerity has been tested for a decade in the Eurozone and has failed, while the proposals in Grillo’s plan have been tested in other countries and have succeeded.

Default: Lessons from Iceland and South America

Default on the public debt has been pulled off quite successfully in Iceland, Argentina, Ecuador, and Russia, among other countries.  Whitney cites a clip from Grillo’s blog suggesting that this is also the way out for Italy:

The public debt has not been growing in recent years because of too much expenditure . . . Between 1980 and 2011, spending was lower than the tax revenue by 484 billion (thus we have been really virtuous) but the interest payments (on the debt of 2,141 billion) that we had to pay in that period have made us poor. In the last 20 years, GDP has been growing slowly, while the debt has exploded.

. . . [S]peculators . . . are contributing to price falls so as to bring about higher interest rates. It’s the usurer’s technique. Thus the debt becomes an opportunity to maximize earnings in the market at the expense of the nation. . . . If financial powerbrokers use speculation to increase their earnings and force governments to pay the highest possible interest rates, the result is recession for the State that’s in debt as well as their loss of sovereignty.

. . . There are alternatives. These are being put into effect by some countries in South America and by Iceland. . . . The risk is that we are going to reach default in any case with the devaluation of the debt, and the Nation impoverished and on its knees. [Beppe Grillo blog]

Bank Nationalization:  China Shows What Can Be Done

Grillo’s second proposal, nationalizing the banks, has also been tested and proven elsewhere, most notably in China. In an April 2012 article in The American Conservative titled “China’s Rise, America’s Fall,” Ron Unz observes:

During the three decades to 2010, China achieved perhaps the most rapid sustained rate of economic development in the history of the human species, with its real economy growing almost 40-fold between 1978 and 2010.  In 1978, America’s economy was 15 times larger, but according to most international estimates, China is now set to surpass America’s total economic output within just another few years.

According to Eamonn Fingleton in In The Jaws of the Dragon (2009), the fountain that feeds this tide is a strong public banking sector:

Capitalism’s triumph in China has been proclaimed in countless books in recent years. . . .  But . . . the higher reaches of its economy remain comprehensively controlled in a way that is the antithesis of everything we associate with Western capitalism.  The key to this control is the Chinese banking system . . . [which is] not only state-owned but, as in other East Asian miracle economies, functions overtly as a major tool of the central government’s industrial policy.

Guaranteed Basic Income—Not Just Welfare

Grillo’s third proposal, a guaranteed basic income, is not just an off-the-wall, utopian idea either. A national dividend has been urged by the “Social Credit” school of monetary reform for nearly a century, and the U.S. Basic Income Guarantee Network has held a dozen annual conferences.  They feel that a guaranteed basic income is the key to keeping modern, highly productive economies humming.

In Europe, the proposal is being pursued not just by Grillo’s southern European party but by the sober Swiss of the north.  An initiative to establish a new federal law for an unconditional basic income was formally introduced in Switzerland in April 2012. The idea consists of giving to all citizens a monthly income that is neither means-tested nor work-related. Under the Swiss referendum system of direct democracy, if the initiative gathers more than 100,000 signatures before October 2013, the Federal Assembly is required to look into it.

Colatrella does not say where Grillo plans to get the money for Italy’s guaranteed basic income, but in Social Credit theory, it would simply be issued outright by the government; and Grillo, who has an accounting background, evidently agrees with that approach to funding.  He said in a presentation available on YouTube:

The Bank of Italy a private join-stock company, ownership comprises 10 insurance companies, 10 foundations, and 10 banks, that are all joint-stock companies . . .  They issue the money out of thin air and lend it to us.  It’s the State who is supposed to issue it.  We need money to work.  The State should say: “There’s scarcity of money?  I’ll issue some and put it into circulation.  Money is plentiful?  I’ll withdraw and burn some of it.” . . . Money is needed to keep prices stable and to let us work.

The Key to a Thriving Economy

Major C.H. Douglas, the thought leader of the Social Credit movement, argued that the economy routinely produces more goods and services than consumers have the money to purchase, because workers collectively do not get paid enough to cover the cost of the things they make.  This is true because of external costs such as interest paid to banks, and because some portion of the national income is stashed in savings accounts, investment accounts, and under mattresses rather than spent on the GDP.

To fill what Social Crediters call “the gap,” so that “demand” rises to meet “supply,” additional money needs to be gotten into the circulating money supply. Douglas recommended doing it with a national dividend for everyone, an entitlement by “grace” rather than “works,” something that was necessary just to raise purchasing power enough to cover the products on the market.

In the 1930s and 1940s, critics of Social Credit called it “funny money” and said it would merely inflate the money supply. The critics prevailed, and the Social Credit solution has not had much chance to be tested. But the possibilities were demonstrated in New Zealand during the Great Depression, when a state housing project was funded with credit issued by the Reserve Bank of New Zealand, the nationalized central bank. According to New Zealand commentator Kerry Bolton, this one measure was sufficient to resolve 75% of unemployment in the midst of the Great Depression.

Bolton notes that this was achieved without causing inflation.  When new money is used to create new goods and services, supply rises along with demand and prices remain stable; but the “demand” has to come first. No business owner will invest in more capacity or production without first seeing a demand. No demand, no new jobs and no economic expansion.

The Need to Restore Economic Sovereignty

The money for a guaranteed basic income could be created by a nationalized central bank in the same way that the Reserve Bank of New Zealand did it, and that central bank “quantitative easing” (QE) is created out of nothing on a computer screen today.  The problem with today’s QE is that it has not gotten money into the pockets of consumers. The money has gotten—and can get—no further than the reserve accounts of banks, as explained here and hereA dividend paid directly to consumers would be “quantitative easing” for the people.

A basic income guarantee paid for with central bank credit would not be “welfare” but would eliminate the need for welfare.  It would be social security for all, replacing social security payments, unemployment insurance, and welfare taxes.  It could also replace much of the consumer debt that is choking the private economy, growing exponentially at usurious compound interest rates.

As Grillo points out, it is not the cost of government but the cost of money itself that has bankrupted Italy. If the country wishes to free itself from the shackles of debt and restore the prosperity it once had, it will need to take back its monetary sovereignty and issue its own money, either directly or through its own nationalized central bank. If Grillo’s party comes to power and follows through with his platform, those shackles on the Italian economy might actually be released.

Ellen Brown is an attorney and the author of eleven books, including Web of Debt: The Shocking Truth About Our Money System and How We Can Break Free. Her websites are webofdebt.com and ellenbrown.com. She is also chairman of the Public Banking Institute. Details of the June 2013 Public Banking Institute conference are here.

The Legacy of Hugo Chavez: The Revolution Within the Revolution Will Continue

chavez3

 The death of Hugo Chávez is a great loss to the people of Venezuela who have been lifted out of poverty and have created a deep participatory democracy. Chavez was a leader who, in unity with the people, was able to free Venezuela from the grips of US Empire, bring dignity to the poor and working class, and was central to a Latin American revolt against US domination.

Chávez grew up a campesino, a peasant, raised in poverty. His parents were teachers, his grandmother an Indian whom he credits with teaching him solidarity with the people. During his military service, he learned about Simon Bolivar, who freed Latin America from Spanish Empire.  This gradually led to the modern Bolivarian Revolution he led with the people. The Chávez transformation was built on many years of a mass political movement that continued after his election, indeed saved him when a 2002 coup briefly removed him from office. The reality is Venezuela’s 21st Century democracy is bigger than Chávez.  This will become more evident now that he is gone.

The Lies They Tell Us

If Americans knew the truth about the growth of real democracy in Venezuela and other Latin American countries, they would demand economic democracy and participatory government, which together would threaten the power of concentrated wealth. Real democracy creates a huge challenge to the oligarchs and their neoliberal agenda because it is driven by human needs, not corporate greed. That is why major media in the US, which are owned by six corporations, aggressively misinform the public about Chávez and the Bolivarian Revolution.

Mark Weisbrot of the Center for Economic and Policy Research writes:

The Western media reporting has been effective. It has convinced most people outside of Venezuela that the country is run by some kind of dictatorship that has ruined it.

In fact, just the opposite is true. Venezuela, since the election of Chávez, has become one of the most democratic nations on Earth. Its wealth is increasing and being widely shared. But Venezuela has been made so toxic that even the more liberal media outlets propagate distortions to avoid being criticized as too leftist.

We spoke with Mike Fox, who went to Venezuela in 2006 to see for himself what was happening. Fox spent years documenting the rise of participatory democracy in Venezuela and Brazil. He found a grassroots movement creating the economy and government they wanted, often pushing Chávez further than he wanted to go.

They call it the “revolution within the revolution.” Venezuelan democracy and economic transformation are bigger than Chávez. Chávez opened a door to achieve the people’s goals: literacy programs in the barrios, more people attending college, universal access to health care, as well as worker-owned businesses and community councils where people make decisions for themselves. Change came through decades of struggle leading to the election of Chávez in 1998, a new constitution and ongoing work to make that constitution a reality.

Challenging American Empire

The subject of Venezuela is taboo because it has been the most successful country to repel the neoliberal assault waged by the US on Latin America. This assault included Operation Condor, launched in 1976, in which the US provided resources and assistance to bring friendly dictators who supported neoliberal policies to power throughout Latin America. These policies involved privatizing national resources and selling them to foreign corporations, de-funding and privatizing public programs such as education and health care, deregulating and reducing trade barriers.

In addition to intense political repression under these dictators between the 1960s and 1980s, which resulted in imprisonment, murder and disappearances of tens of thousands throughout Latin America, neoliberal policies led to increased wealth inequality, greater hardship for the poor and working class, as well as a decline in economic growth.

Neoliberalism in Venezuela arrived through a different path, not through a dictator. Although most of its 20th century was spent under authoritarian rule, Venezuela has had a long history of pro-democracy activism. The last dictator, Marcos Jimenez Perez, was ousted from power in 1958. After that, Venezuelans gained the right to elect their government, but they existed in a state of pseudo-democracy, much like the US currently, in which the wealthy ruled through a managed democracy that ensured the wealthy benefited most from the economy.

As it did in other parts of the world, the US pushed its neoliberal agenda on Venezuela through the International Monetary Fund (IMF) and World Bank. These institutions required Structural Adjustment Programs (SAP) as terms for development loans. As John Perkins wrote in Confessions of an Economic Hit Man, great pressure was placed on governments to take out loans for development projects. The money was loaned by the US, but went directly to US corporations who were responsible for the projects, many of which failed, leaving nations in debt and not better off. Then the debt was used as leverage to control the government’s policies so they further favored US interests. Anun Shah explains the role of the IMF and World Bank in more detail in Structural Adjustment – a Major Cause of Poverty.

Neoliberalism Leads to the Rise of Chávez

A turning point in the Venezuelan struggle for real democracy occurred in 1989. President Carlos Andres Perez ran on a platform opposing neoliberalism and promised to reform the market during his second term. But following his re-election in 1988, he reversed himself and continued to implement the “Washington Consensus” of neoliberal policies – privatization and cuts to social services. The last straw came when he ended subsidies for oil. The price of gasoline doubled and public transportation prices rose steeply.

Protests erupted in the towns surrounding the capitol, Caracas, and quickly spread into the city itself. President Perez responded by revoking multiple constitutional rights to protest and sending in security forces who killed an estimated 3,000 people, most of them in the barrios. This became known as the “Caracazo” (“the Caracas smash”) and demonstrated that the president stood with the oligarchs, not with the people.

Under President Perez, conditions continued to deteriorate for all but the wealthy in Venezuela. So people organized in their communities and with Lieutenant Colonel Hugo Chávez attempted a civilian-led coup in 1992. Chávez was jailed, and so the people organized for his release. Perez was impeached for embezzlement of 250 million bolivars and the next president, Rafael Caldera, promised to release Chávez when he was elected. Chávez was freed in 1994. He then traveled throughout the country to meet with people in their communities and organizers turned their attention to building a political movement.

Chávez ran for president in 1998 on a platform that promised to hold a constituent assembly to rewrite the constitution saying:

I swear before my people that upon this moribund constitution I will drive forth the necessary democratic transformations so that the new republic will have a Magna Carta befitting these new times.

Against the odds, Chávez won the election and became president in 1999.

While his first term was cautious and center-left, including a visit by Chávez to the NY Stock Exchange to show support for capitalism and encourage foreign investment, he kept his promise. Many groups participated in the formation of the new constitution, which was gender-neutral and included new rights for women and for the indigenous, and created a government with five branches adding a people’s and electoral branches. The new constitution was voted into place by a 70 percent majority within the year. Chávez also began to increase funding for the poor and expanded and transformed education.

Since then, Chávez has been re-elected twice. He was removed from power briefly in 2002, jailed and replaced by Pedro Carmona, the head of what is equivalent to the Chamber of Commerce. Fox commented that the media was complicit in the coup by blacking it out and putting out false information. Carmona quickly moved to revoke the constitution and disband the legislature. When the people became aware of what was happening, they rapidly mobilized and surrounded the capitol in Caracas. Chávez was reinstated in less than 48 hours.

One reason the Chávez election is called a Bolivarian Revolution is because Simon Bolivar was a military political leader who freed much of Latin America from the Spanish Empire in the early 1800s. The election of Chávez, the new constitution and the people overcoming the coup set Venezuela on the path to free itself from the US empire. These changes emboldened the transformation to sovereignty, economic democracy and participatory government.

In fact, Venezuela paid its debts to the IMF in full five years ahead of schedule and in 2007 separated from the IMF and World Bank, thus severing the tethers of the Washington Consensus. Instead, Venezuela led the way to create the Bank of the South to provide funds for projects throughout Latin America and allow other countries to free themselves from the chains of the IMF and World Bank too.

The Rise of Real Democracy

The struggle for democracy brought an understanding by the people that change only comes if they create it. The pre- Chávez era is seen as a pseudo Democracy, managed for the benefit of the oligarchs. The people viewed Chávez as a door that was opened for them to create transformational change. He was able to pass laws that aided them in their work for real democracy and better conditions. And Chávez knew that if the people did not stand with him, the oligarchs could remove him from power as they did for two days in 2002.

With this new understanding and the constitution as a tool, Chávez and the people have continued to progress in the work to rebuild Venezuela based on participatory democracy and freedom from US interference. Chávez refers to the new system as “21st century socialism.” It is very much an incomplete work in progress, but already there is a measurable difference.

Mark Weisbrot of CEPR points out that real GDP per capita in Venezuela expanded by 24 percent since 2004. In the 20 years prior to Chávez, real GDP per person actually fell. Venezuela has low foreign public debt, about 28 percent of GDP, and the interest on it is only 2 percent of GDP. Weisbrot writes:

From 2004-2011, extreme poverty was reduced by about two-thirds. Poverty was reduced by about one-half, and this measures only cash income. It does not count the access to health care that millions now have, or the doubling of college enrollment – with free tuition for many. Access to public pensions tripled. Unemployment is half of what it was when Chávez took office.

Venezuela has reduced unemployment from 20 percent to 7 percent.

As George Galloway wrote upon Chávez’s death:

Under Chávez’ revolution the oil wealth was distributed in ever rising wages and above all in ambitious social engineering. He built the fifth largest student body in the world, creating scores of new universities. More than 90% of Venezuelans ate three meals a day for the first time in the country’s history. Quality social housing for the masses became the norm with the pledge that by the end of the presidential term, now cut short, all Venezuelans would live in a dignified house.

Venezuela is making rapid progress on other measures too. It has a high human development index and a low and shrinking index of inequality. Wealth inequality in Venezuela is half of what it is in the United States. It is rated “the fifth-happiest nation in the world” by Gallup. And Pepe Escobar writes that:

No less than 22 public universities were built in the past 10 years. The number of teachers went from 65,000 to 350,000. Illiteracy has been eradicated. There is an ongoing agrarian reform.

Venezuela has undertaken significant steps to build food security through land reform and government assistance. New homes are being built, health clinics are opening in under-served areas and cooperatives for agriculture and business are growing.

Venezuelans are very happy with their democracy. On average, they gave their own democracy a score of seven out of ten while the Latin American average was 5.8. Meanwhile, 57 percent of Venezuelans reported being happy with their democracy compared to an average for Latin American countries of 38 percent, according to a poll conducted by Latinobarometro. While 81 percent voted in the last Venezuelan election, only 57.5 percent voted in the recent US election.

Chávez won that election handily as he has all of the elections he has run in since 1999. As Galloway describes him, Chávez was “the most elected leader in the modern era.” He won his last election with 55 percent of the vote but was never inaugurated due to his illness.

Beyond Voting: The Deepening of Democracy in Venezuela

This is not to say that the process has been easy or smooth. The new constitution and laws passed by Chávez have provided tools, but the government and media still contain those who are allied with the oligarchy and who resist change. People have had to struggle to see that what is written on paper is made into a reality. For example, Venezuelans now have the right to reclaim urban land that is fallow and use it for food and living. Many attempts have been made to occupy unused land and some have been met by hostility from the community or actual repression from the police. In other cases, attempts to build new universities have been held back by the bureaucratic process.

It takes time to build a new democratic structure from the bottom up. And it takes time to transition from a capitalist culture to one based on solidarity and participation. In “Venezuela Speaks,” one activist, Iraida Morocoima, says “Capitalism left us with so many vices that I think our greatest struggle is against these bad habits that have oppressed us.” She goes on to describe a necessary culture shift as, “We must understand that we are equal, while at the same time we are different, but with the same rights.”

Chávez passed a law in 2006 that united various committees in poor barrios into community councils that qualify for state funds for local projects. In the city, community councils are composed of 200 to 400 families. The councils elect spokespeople and other positions such as executive, financial and “social control” committees. The council members vote on proposals in a general assembly and work with facilitators in the government to carry through on decisions. In this way, priorities are set by the community and funds go directly to those who can carry out the project such as building a road or school. There are currently more than 20,000 community councils in Venezuela creating a grassroots base for participatory government.

A long-term goal is to form regional councils from the community councils and ultimately create a national council. Some community councils already have joined as communes, a group of several councils, which then have the capacity for greater research and to receive greater funds for large projects.

The movement to place greater decision-making capacity and control of local funds in the hands of communities is happening throughout Latin America and the world. It is called participatory budgeting and it began in Porto Alegre, Brazil in 1989 and has grown so that as many as 50,000 people now participate each year to decide as much as 20 percent of the city budget. There are more than 1,500 participatory budgets around the world in Latin America, North America, Asia, Africa, and Europe. Fox produced a documentary, Beyond Elections: Redefining Democracy in the Americas, which explains participatory budgeting in greater detail.

The Unfinished Work of Hugo Chávez Continues

The movements that brought him to power and kept him in power have been strengthened by Hugo Chávez. Now the “revolution within the revolution” will be tested.  In 30 days there will be an election and former vice president, now interim president, Nicolas Maduro will likely challenge the conservative candidate Chávez defeated.

If the United States and the oligarchs think the death of Chávez means the end of the Bolivarian Revolution he led, they are in for a disappointment.  This revolution, which is not limited to Venezuela, is likely to show to itself and the world that it is deep and strong. The people-powered transformation with which Chávez was in solidarity will continue.

CIA and FBI Had Planned to Assassinate Hugo Chávez

chavez3

Article originally published by Global Research in 2005, which points to previous attempts to assassinate President Hugo Chavez

This empire, unlike any other in the history of the world, has been built primarily through economic manipulation.  “How do we know that the CIA was behind the coup that overthrew Hugo Chávez?” asked historian William Blum in 2002.

“Same way we know that the sun will rise tomorrow morning. That’s what it’s always done and there’s no reason to think that tomorrow morning will be any different.”

Now we have a bit more evidence the CIA and the FBI connived with reactionary elements to not only briefly overthrow Chávez, abolish the constitution and the National Assembly, but later assassinate the Venezuelan State Prosecutor, Danilo Anderson. He was killed by a car bomb in Caracas on November 18, 2004, while investigating those who were behind the coup. Giovani Jose Vasquez De Armas, a member of Colombia’s right wing paramilitary group called the United Self-Defense Forces of Colombia, claims he was in charge of logistics for the plot to kill Danilo Anderson. Vasquez De Armas told the Attorney General’s office that those planning the killing, “all discussed the plan with the help of the FBI and CIA.”

And the sun will rise tomorrow.

“According to the Attorney General, Vasquez De Armas said that during a meeting in Darien, Panama, on September 4 and 6, 2003, an FBI Officer called ‘Pesquera’ and a CIA agent called ‘Morrinson,’ attended a meeting along with two of the plot’s alleged organizers, Patricia Poleo and Salvador Romani, as well as two of those who actually did the killing, Rolando and Otoniel Guevera,” writes Alessandro Parma. “An official from the Attorney General’s office, speaking on behalf of Vasquez De Armas, said that in Panama the FBI and the plotting Venezuelans agreed, ‘to take out Chavez and the Government.’ He said, ‘the meeting’s final objective was to kill President Chavez and the Attorney General.’”

None of this is new or particularly revelatory.  Steve Kangas writes:

“CIA operations follow the same recurring script. First, American business interests abroad are threatened by a popular or democratically elected leader. The people support their leader because he intends to conduct land reform, strengthen unions, redistribute wealth, nationalize foreign-owned industry, and regulate business to protect workers, consumers and the environment. So, on behalf of American business, and often with their help, the CIA mobilizes the opposition. First it identifies right-wing groups within the country (usually the military), and offers them a deal: “We’ll put you in power if you maintain a favorable business climate for us.” The Agency then hires, trains and works with them to overthrow the existing government (usually a democracy). It uses every trick in the book: propaganda, stuffed ballot boxes, purchased elections, extortion, blackmail, sexual intrigue, false stories about opponents in the local media, infiltration and disruption of opposing political parties, kidnapping, beating, torture, intimidation, economic sabotage, death squads and even assassination. These efforts culminate in a military coup, which installs a right-wing dictator. The CIA trains the dictator’s security apparatus to crack down on the traditional enemies of big business, using interrogation, torture and murder. The victims are said to be “communists,” but almost always they are just peasants, liberals, moderates, labor union leaders, political opponents and advocates of free speech and democracy. Widespread human rights abuses follow.”

Examples include the coup to overthrow the democratically elected leader Mohammed Mossadegh in Iran, the ouster of democratically elected Jacob Arbenz in Guatemala, one coup per year (between 1957-1973) in Laos, the installation of the murderous “Papa Doc” Duvalier in Haiti, the assassination of Rafael Trujillo in the Dominican Republic, the overthrow of Jose Velasco in Ecuador, the assassination of the democratically elected Patrice Lumumba in the Congo (later Zaire), the overthrow of the democratically elected Juan Bosch in the Dominican Republic, the overthrow of the democratically elected government of Joao Goulart in Brazil, the overthrow of the democratically elected Sukarno government in Indonesia, a military coup in Greece designed to install the “reign of the colonels” (when the Greek ambassador complained about CIA plans for Cypress, Johnson told him: “F— your parliament and your constitution”), the overthrow of the popular Prince Sahounek in Cambodia, the overthrow of Juan Torres in Bolivia, the overthrow and assassination of Salvador Allende in Chile, the assassination of archbishop Oscar Romero in El Salvador, and dozens of other incidents rarely if ever taught in American school history lessons.

As John Perkins (author of Confessions of an Economic Hit Man), as a former respected member of the international banking community and National Security Agency economist, told Amy Goodman: “Basically what we were trained to do and what our job is to do is to build up the American empire. To bring—to create situations where as many resources as possible flow into this country, to our corporations, and our government…. This empire, unlike any other in the history of the world, has been built primarily through economic manipulation, through cheating, through fraud, through seducing people into our way of life, through the economic hit men.” Perkins’ job was “deal-making”:

It was giving loans to other countries, huge loans, much bigger than they could possibly repay. One of the conditions of the loan—let’s say a $1 billion to a country like Indonesia or Ecuador—and this country would then have to give ninety percent of that loan back to a U.S. company, or U.S. companies, to build the infrastructure—a Halliburton or a Bechtel. These were big ones. Those companies would then go in and build an electrical system or ports or highways, and these would basically serve just a few of the very wealthiest families in those countries. The poor people in those countries would be stuck ultimately with this amazing debt that they couldn’t possibly repay. A country today like Ecuador owes over fifty percent of its national budget just to pay down its debt. And it really can’t do it. So, we literally have them over a barrel. So, when we want more oil, we go to Ecuador and say, “Look, you’re not able to repay your debts, therefore give our oil companies your Amazon rain forest, which are filled with oil.” And today we’re going in and destroying Amazonian rain forests, forcing Ecuador to give them to us because they’ve accumulated all this debt. So we make this big loan, most of it comes back to the United States, the country is left with the debt plus lots of interest, and they basically become our servants, our slaves. It’s an empire. There’s no two ways about it. It’s a huge empire. It’s been extremely successful.

Most of the money for these loans, according to Perkins, is provided by the World Bank and the International Monetary Fund, the two premier neolib loan sharking operations (it is important to note that the Straussian neocon, Paul Wolfowitz, is now president of the World Bank, thus demonstrating how closely related the neocons and traditional neolibs are).

If the loan sharks are unable to steal natural resources (oil, minerals, rainforests, water) as a condition of repaying this immense debt, “the next step is what we call the jackals.”

Jackals are CIA-sanctioned people that come in and try to foment a coup or revolution. If that doesn’t work, they perform assassinations—or try to. In the case of Iraq, they weren’t able to get through to Saddam Hussein… His bodyguards were too good. He had doubles. They couldn’t get through to him. So the third line of defense, if the economic hit men and the jackals fail, the next line of defense is our young men and women, who are sent in to die and kill, which is what we’ve obviously done in Iraq.

Hugo Chávez is now between the assassination point of this neolib plan and invasion, when “our young men and women” will be “sent in to die and kill” Venezuelan peasants the same way they are now killing poor Iraqis. Of course, it remains to be seen if Bush can actually invade Venezuela—the neocon roster is teeming with targets, from Syria to Iran—and so we can expect the Bushcons and their jackals to continue efforts to assassinate Chávez, as Giovani Jose Vasquez De Armas reveals the CIA and the FBI are attempting to do, with little success. One notable failure by the jackals is Fidel Castro in Cuba, who experienced numerous assassination attempts and CIA counterinsurgency specialist Edward Lansdale’s Operation Mongoose (consisting of sabotage and political warfare), also known as the ‘’Cuba Project.’‘

As Blum notes, we know all of this is happening, same as we know the sun will come up tomorrow.

Kurt Nimmo is a photographer, multimedia artist and writer. You can visit his blog “Another Day in the Empire” at www.kurtnimmo.com/blog.

It’s Time to Tax Financial Transactions

On Friday at midnight, the sequester kicked in, triggering $85 billion in deep, dumb budget cuts that sent “nonessential personnel”— such as air traffic controllers — packing.

Not to worry, though: Wall Street’s day was pretty much like any other. Billions of dollars in profits were made off of trillions of dollars in financial transactions. And the vast majority of those transactions were conducted tax-free.

Moral of the story: What else is new?

Crash the economy? Free pass. Prevent planes from crashing? Pink slip.

We don’t need a team of policymakers to tell us this isn’t good policy, or that it needs changing. But on Thursday, we heard policymakers propose exactly that: a change.

Sens. Tom Harkin (D-Iowa) and Sheldon Whitehouse (D-R.I.), along with Rep. Pete DeFazio (D-Ore.), unveiled a bill that would place a light tax on all financial transactions — three pennies on every $100 traded.

The good news is that it’s a tax so small it could be mistaken for a rounding error. It’s so small, Wall Street could easily afford it and the average E-Trade investor would barely notice it. If this were a tax on coffee, it would cost you $1 for every 800 cups you bought at Starbucks.

But there’s even better news. This insignificant tax raises a significant amount of revenue — $352 billion over the next 10 years, or enough to refund about one-third of what the sequester will slash from the federal budget. It’s also enough to put many air traffic controllers back to work, Head Start teachers back in preschools, and crucial government programs back in business.

As the saying goes, “Nothing can resist an idea whose time has come.”

And after years of Wall Street excess, and at a moment when new revenues are badly needed, the time has surely come for a financial transaction tax .

Indeed, support for such a tax has never been stronger — or broader. Many on the progressive left have long favored it . Now, though, another group of bleeding-heart liberals, otherwise known as the American people, is on board. When it comes to cutting the deficit, 6 in 10 Americans prefer taxing the financial industry to cutting social spending.

But this idea doesn’t just have the masses on its side; it has the elites, and even some Republican elites. Once championed by the granddaddy of liberal economics, John Maynard Keynes, the banner of a financial transactions tax has been picked up by conservative economists including Sheila Bair, George W. Bush’s appointee to the Federal Deposit Insurance Corp.

After all, the tax isn’t just a good revenue raiser. It’s smart regulatory reform.

The high-frequency traders that now dominate our markets would be hardest-hit by the tax. A top economist recently concluded that their lightning speed, algorithm-driven trading drains profits from traditional investors. And analysts fear that such mass trading strategies could lead to disaster if markets behave unexpectedly.

The new tax would discourage these kinds of trades, which would be a good thing.

Europe, at least, seems to agree. Eleven nations, led by the conservative German government, are on track to start collecting the tax by January 2014. Expected revenues: $50 billion per year.

Of course, we’re talking about a tax on Wall Street.

It’s no wonder that, over the past few weeks, K Street appears to have upped the financial sector’s retainer. Their lobbying effort against the tax — here and in Europe — is in full swing.

Even the Obama administration has been convinced to come out against the tax in the United States. And they’re pressuring Europeans to water down their version by insulating American banks. What’s the logic driving this opposition?

Some have argued that, historically, these taxes have been ineffective because of widespread evasion. But they’re cherry-picking a few badly designed examples, such as Sweden’s lemon of a tax from nearly 30 years ago. This is like saying cars don’t work because you bought a Datsun in the ’70s.

Many countries have implemented such taxes effectively. The United Kingdom, for example, manages to raise more than $5 billion per year on a 0.5 percent tax on stock trades alone.

Another common argument is that the tax will be passed on to mom-and-pop investors. The just-introduced U.S. legislation addresses these concerns by providing tax credits for contributions to typical middle-class investment accounts, including 401(k)s. Investment funds would still be taxed on their trades, but this could encourage longer-term productive investment instead of the short-term speculation that adds little to no value to the real economy.

If the Obama administration is serious about fair taxation and a smart approach to the deficit, it should change its position. Rather than trying to derail Europe’s efforts, it should cooperate with Europe to ensure that the tax there is effectively enforced. And the administration should build support in Congress, including among Republicans.

Yes, we’ve all heard House Speaker John Boehner’s line that the debate over revenue raising is over. We also remember former President George H.W. Bush’s line, “Read my lips, no new taxes,” and how quickly his lips starting saying something else.

For tea partyers, wouldn’t a tax on Wall Street, the beneficiaries of the bailout they so reviled, be less objectionable than most other revenue options?

Sequestration is a septic wound, self-inflicted by lawmakers who can’t agree on anything. Here, at last, we have a smart idea with widespread support — Americans and Europeans, populists and economists, progressives and conservatives.

After Friday’s dumb budget cuts, a little smart policymaking would be nice for a change.

© 2013 The Washington Post

Katrina vanden Heuvel

Katrina vanden Heuvel is editor of The Nation.

The Privatization of War: Mercenaries, Private Military and Security Companies (PMSC)

The Privatization of War: Mercenaries, Private Military and Security Companies (PMSC)

Private military and security companies (PMSC) are the modern reincarnation of a long lineage of private providers of physical force: corsairs, privateers and mercenaries. Mercenaries, which had practically disappeared during the XIXth and XXth centuries, reappeared in the 1960’s during the decolonization period operating mainly in Africa and Asia. Under the United Nations a convention was adopted which outlaws and criminalizes their activities. Additional Protocol I of the Geneva Conventions also contains a definition of mercenary.

These non-state entities of the XXIst century operate in extremely blurred situations where the frontiers are difficult to separate. The new security industry of private companies moves large quantities of weapons and military equipment. It provides services for military operations recruiting former militaries as civilians to carry out passive or defensive security.

However, these individuals cannot be considered as civilians, given that they often carry and use weapons, interrogate prisoners, load bombs, drive military trucks and fulfill other essential military functions. Those who are armed can easily switch from a passive/defensive to an active/offensive role and can commit human rights violations and even destabilize governments. They cannot be considered soldiers or supporting militias under international humanitarian law either, since they are not part of the army or in the chain of command, and often belong to a large number of different nationalities.

PMSC personnel cannot usually be considered to be mercenaries for the definition of mercenaries as stipulated in the international conventions dealing with this issue does not generally apply to the personnel of PMSCs which are legally operating in foreign countries under contracts of legally registered companies.

Private military and security companies operate in a legal vacuum: they pose a threat to civilians and to international human rights law. The UN Human Rights Council has entrusted the UN Working Group on the use of mercenaries, principally, with the mandate: “To monitor and study the effects of the activities of private companies offering military assistance, consultancy and security services on the international market on the enjoyment of human Rights (…) and to prepare draft international basic principles that encourage respect for human rights on the part of those companies in their activities”.

During the past five years, the Working Group has been studying emerging issues, manifestations and trends regarding private military and security companies.  In our reports we have informed the Human Rights Council and the General Assembly about these issues. Of particular importance are the reports of the Working Group to the last session of the Human Rights Council, held in September 2010, on the Mission to the United States of America  (20 July to 3 August 2009), Document A/HRC/15/25/Add.3; on the Mission to Afghanistan (4-9 April 2009), Document A/HRC/15/25/Add.2, and the general report of the Working Group containing the Draft of a possible Convention on Private Military and Security Companies (PMSCs) for consideration and action by the Human Rights Council, Document A/HRC/15/25.

In the course of our research, since 2006, we have collected ample information which indicate the negative impact of the activities of “private contractors”, “private soldiers” or “guns for hire”, whatever denomination we may choose to name the individuals employed by private military and security companies as civilians but in general heavily armed. In the cluster of human rights violations allegedly perpetrated by employees of these companies, which the Working Group has examined one can find: summary executions, acts of torture, cases of arbitrary detention; of trafficking of persons; serious health damages caused by their activities; as well as attempts against the right of self-determination. It also appears that PMSCs, in their search for profit, neglect security and do not provide their employees with their basic rights, and often put their staff in situations of danger and vulnerability.

Summary executions

On 16 September 2007 in Baghdad, employees of the US-based firm Blackwater[1] were involved in a shooting incident in Nisoor Square in which 17 civilians were killed and more than 20 other persons were wounded including women and children. Local eyewitness accounts indicate the use of arms from vehicles and rocket fire from a helicopter belonging to this company.

There are also concerns over the activities and approach of PMSC personnel, their convoys of armored vehicles and their conduct in traffic, in particular their use of lethal force. This particular incident was not the first of its kind, neither the first involving Blackwater.

According to a congressional report on the behaviour of Xe/Blackwater in Iraq, Xe/Blackwater guards were found to have been involved in nearly 200 escalation-of-force incidents that involved the firing of shots since 2005. Despite the terms of the contracts which provided that the company could engage only in defensive use of force, the company reported that in over 80 per cent of the shooting incidents, its forces fired the first shots.

In Najaf in April 2004 and on several other occasions, employees of this company took part in direct hostilities, as well as in May 2007, where another incident involving the same company reportedly occurred involving guards belonging to the company and forces belonging to the Iraqi Ministry of the Interior allegedly exchanged gunfire in a sector of Baghdad.

Also in central Baghdad the shooting of employees of the PMSC, Unity Resources Group (URG)[2], protecting a convoy, left two Armenian women, Genevia Antranick and Mary Awanis dead on 9 October 2007 when their car came too close to a protected convoy. The family of Genevia Antranick was offered no compensation and has begun court proceedings against URG in the United States.

This company was also involved in the shooting of 72-year-old Australian Kays Juma. Professor Juma was shot in March 2006 as he approached an intersection being blockaded for a convoy URG was protecting. Professor Juma, a 25-year resident of Baghdad who drove through the city every day, allegedly sped up his vehicle as he approached the guards and did not heed warnings to stop, including hand signals, flares, warning shots into the body of his car and floodlights. The incident occurred at 10am[3].

Torture

Two United States-based corporations, CACI and L-3 Services (formerly Titan Corporation), were involved in the torture of Iraqi detainees at Abu Ghraib. CACI and L-3 Services, contracted by the Government of the United States, were responsible for interrogation and translation services, respectively, at Abu Ghraib prison and other facilities in Iraq.

Seventy two Iraqi citizens who were formerly detained at military prisons in Iraq, have sued L-3 Services, Inc. (“L-3”), a military private contractor which provided civilian translators for United States military forces in Iraq and Adel Nakhla, a former employee of L-3 who served as one of its translators there under the Alien Tort Statute. They allege having been tortured and physically and mentally abused during their detention and that they should be held liable in damages for their actions. The plaintiffs assert 20 causes of action, among which: torture; cruel, inhuman, or degrading treatment; assault and battery; intentional infliction of emotional distress[4].

Arbitrary detention 

A number of reports indicate that private security guards have played central roles in some of the most sensitive activities of the Central Intelligence Agency (CIA) such as the arbitrary detention and clandestine raids against alleged insurgents in Iraq and Afghanistan[5] and the involvement in CIA rendition flights[6] as well as joint covert operations[7]. Employees of PMSC would have been involved in the taking of detainees, from “pick up points” (such as Tuzla, Islamabad or Skopje) transporting them in rendition flights and delivering them to drop off points (such as Cairo, Rabat, Bucharest, Amman or Guantanamo) as well as in the construction, equipping and staffing of CIA’s “black sites”.

Within this context, the American Civil Liberties Union has filed a lawsuit in May 2007 against Jeppesen DataPlan Inc. (a subsidiary company of Boeing) on behalf of five persons who were kidnapped by the CIA disappearing in overseas prisons kept by USA secret services. Jeppesen would have participated in the rendition by providing flight planning and logistical support. The five persons were tortured during their arbitrary detention[8].

Health

The 2009 annual report of DynCorp International refers to four lawsuits concerning the spraying of narcotic plant crops along the Colombian border adjacent to Ecuador on behalf of 3 Ecuadorian Providences and 3266 plaintiffs[9].

From 1991, the United States Department of State contracted the private company DynCorp to supply services for this air-spraying program against narcotics in the Andean region. In accordance with the subscribed contract of 30 January 1998, DynCorp provides the essential logistics to the anti-drug Office of activities of Colombia, in conformity with three main objectives: eradication of cultivations of illicit drugs, training of the army and of personnel of the country, and dismantling of illicit drug laboratories and illicit drug-trafficking networks.

An NGO report indicated the consequences of the spraying carried out within the Plan Colombia had on persons living in the frontier region[10].  One third of the 47 women in the study exposed to the spraying showed cells with some genetic damage. The study established the relationship of the air fumigations of the Plan Colombia with damages in the genetic material. The study demonstrates that when the population is subjected to fumigations “the risk of cellular damage can increase and that, once permanent, the cases of cancerous mutations and important embryonic alterations are increased that prompt among other possibilities the rise in abortions in the area.

This example is particularly important given that Plan Colombia has served as the model for the arrangements that the United States would apply later to Iraq and Afghanistan. Plan Colombia provides immunity to the employees of the PMSC contracted (DynCorp) the same as Order 14 of the Coalition Provisional Authority did in Iraq.

Self-determination

The 2004 attempted coup d’état, which was perpetrated in Equatorial Guinea is a clear example of the link between the phenomenon of mercenaries and PMSCs as a means of violating the sovereignty of States. In this particular case, the mercenaries involved were mostly former directors and personnel of Executive Outcomes, a PMSC that had become famous for its operations in Angola and Sierra Leone. The team of mercenaries also included security guards who were still employed by PMSCs as was the case of two employees of the company Meteoric Tactical Systems providing security to diplomats of Western Embassies in Baghdad-among which to the Ambassador of Switzerland. It also included a security guard who had previously worked for the PMSC “Steele Foundation” and had given protection to President Aristide of Haiti and conducted him to the plane who took him to exile[11].

Trafficking in persons

In 2005, 105 Chileans were providing/or undergoing military training in the former army base of Lepaterique in Honduras. The instruction consisted in anti‐guerrilla tactics such as possible ambushes and deactivation of explosives and mortars how to avoid them. The Chileans had entered Honduras as tourists and were illegally in Honduras. They used high‐caliber weapons such as M‐16 rifles or light machine guns. They had been contracted by a subsidiary of Triple Canopy.

They were part of a group, which included also 189 Hondurans recruited and trained in Honduras. Triple Canopy had been awarded a contract by the United States Department of State. The strong contingent left the country by air from San Pedro Sula, Honduras, in several groups with a stopover in Iceland. Then reached the Middle East and were smuggled into Iraq[12].

The majority of the Chileans and Hondurans were engaged as security guards at fixed facilities in Iraq. They had been contracted by Your Solutions Honduras SRL, a local agent of Your Solutions Incorporated, registered in Illinois, United States of America, which in turn had been subcontracted by Triple Canopy, based in Chicago, United States of America. Some of the Chileans are presently working in Baghdad providing security to the Embassy of Australia under a contract by Unity Resources Group (URG).

Human rights violations committed by PMSC to their employees

PMSC often put the contracted private guards in situations of danger and vulnerability, such as the ‘private contractors’ of Blackwater, killed in Fallujah in 2004 allegedly due to the lack of the necessary safety means that Blackwater was supposed to provide in order to carry out the mission.

It should not be forgotten that this incident changed dramatically the course of the war and the occupation by the United States in Iraq. It may be considered as the turning point in the occupation of Iraq. This led to an abortive US operation to recapture control of the city and a successful recapture operation in the city in November 2004, called Operation Phantom Fury, which resulted in the death of over 1,350 insurgent fighters. Approximately 95 America troops were killed, and 560 wounded.

The U.S. military first denied that it has use white phosphorus as an anti-personnel weapon in Fallujah, but later retracted that denial, and admitted to using the incendiary in the city as an offensive weapon. Reports following the events of November 2004 have alleged war crimes, and a massacre by U.S. personnel, including indiscriminate violence against civilians and children.http://en.wikipedia.org/wiki/Fallujah – cite_note-17 This point of view is presented in the 2005 documentary film, “Fallujah, the Hidden Massacre”. In 2010, the International Journal of Environmental Research and Public Health, a leading medical journal, published a study, which shows that the rates of cancer, infant mortality and leukemia exceed those reported in Hiroshima and Nagasaki[13].

The over 300 000 classified military documents made public by Wikileaks show that the “Use of Contractors Added to War’s Chaos in Iraq”, as has been widely reported by the international media recently.

The United States has relied and continues to rely heavily on private military and security contractors in conducting its military operations. The United States used private security contractors to conduct narcotics intervention operations in Colombia in the 1990s and recently signed a supplemental agreement that authorizes it to deploy troops and contractors in seven Colombian military bases. During the conflict in the Balkans, the United States used a private security contractor to train Croat troops to conduct operations against Serbian troops. Nowadays, it is in the context of its operations in Iraq and Afghanistan in particular that the State is massively contracting out security functions to private firms.

In 2009, the Department of Defense employed 218,000 private contractors (all types) while there were 195,000 uniformed personnel. According to the figures, about 8 per cent of these contractors are armed security contractors, i.e. about 20,000 armed guards. If one includes other theatres of operations, the figure rises to 242,657, with 54,387 United States citizens, 94,260 third country nationals and 94,010 host-country nationals.

The State Department relies on about 2,000 private security contractors to provide United States personnel and facilities with personal protective and guard services in Afghanistan, Iraq, Israel and Pakistan, and aviation services in Iraq. The contracts for protective services were awarded in 2005 to three PMSCs, namely, Triple Canopy, DynCorp International and the U.S. Training Center, part of the Xe (then Blackwater) group of companies. These three companies still hold the State Department protective services contracts today.

Lack of transparency

The information accessible to the public on the scope and type of contracts between the Government of the United States and PMSCs is scarce and opaque. The lack of transparency is particularly significant when companies subcontract to others. Often, the contracts with PMSCs are not disclosed to the public despite extensive freedom of information rules in the United States, either because they contain confidential commercial information or on the argument that non-disclosure is in the interest of national defense or foreign policy. The situation is particularly opaque when United States intelligence agencies contract PMSCs.

Lack of accountability

Despite the fact of their involvement in grave human rights violations, not a single PMSC or employee of these companies has been sanctioned.

In the course of litigation, several recurring legal arguments have been used in the defense of PMSCs and their personnel, including the Government contractor defense, the political question doctrine and derivative immunity arguments. PMSCs are using the Government contractor defense to argue that they were operating under the exclusive control of the Government of the United States when the alleged acts were committed and therefore cannot be held liable for their actions.

It looks as if when the acts are committed by agents of the government they are considered human rights violations but when these same acts are perpetrated by PMSC it is “business as usual”.

The human rights violation perpetrated by private military and security companies are indications of the threat posed to the foundations of democracy itself by the privatization of inherently public functions such as the monopoly of the legitimate use of force. In this connection I cannot help but to refer to the final speech of President Eisenhower.

In 1961, President Eisenhower warned the American public opinion against the growing danger of a military industrial complex stating: “(…) we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military industrial complex. The potential for the disastrous rise of misplaced power exists and will persist. We must never let the weight of this combination endanger our liberties or democratic processes. We should take nothing for granted. Only an alert and knowledgeable citizenry can compel the proper meshing of the huge industrial and military machinery of defence with our peaceful methods and goals, so that security and liberty may prosper together”.

Fifty years later, on 8 September 2001, Donald Rumsfeld in his speech in the Department of Defence warned the militaries of the Pentagon against “an adversary that poses a threat, a serious threat, to the security of the United States of America (…) Let’s make no mistake: The modernization of the Department of Defense is (…) a matter of life and death, ultimately, every American’s. (…) The adversary. (…) It’s the Pentagon bureaucracy. (…)That’s why we’re here today challenging us all to wage an all-out campaign to shift Pentagon’s resources from bureaucracy to the battlefield, from tail to the tooth. We know the adversary. We know the threat. And with the same firmness of purpose that any effort against a determined adversary demands, we must get at it and stay at it. Some might ask, how in the world could the Secretary of Defense attack the Pentagon in front of its people? To them I reply, I have no desire to attack the Pentagon; I want to liberate it. We need to save it from itself.”

Rumsfeld should have said the shift from the Pentagon’s resources from bureaucracy to the private sector. Indeed, that shift had been accelerated by the Bush Administration: the number of persons employed by contract which had been outsourced (privatized) by the Pentagon was already four times more than at the Department of Defense.

It is not anymore a military industrial complex but as Noam Chomsky has indicated “it’s just the industrial system operating under one or another pretext”.

The articles of the Washington Post “Top Secret America: A hidden world, growing beyond control”, by Dana Priest and William M. Arkin (19 July 2010) show the extent that “The top-secret world the government created in response to the terrorist attacks of Sept. 11, 2001, has become so large, so unwieldy and so secretive that no one knows how much money it costs, how many people it employs, how many programs exist within it or exactly how many agencies do the same work”.

The investigation’s findings include that some 1,271 government organizations and 1,931 private companies work on programs related to counterterrorism, homeland security and intelligence in about 10,000 locations across the United States; and that an estimated 854,000 people, nearly 1.5 times as many people as live in Washington, D.C., hold top-secret security clearances. A number of private military and security companies are among the security and intelligence agencies mentioned in the report of the Washington Post.

The Working Group received information from several sources that up to 70 per cent of the budget of United States intelligence is spent on contractors. These contracts are classified and very little information is available to the public on the nature of the activities carried out by these contractors.

The privatization of war has created a structural dynamic, which responds to a commercial logic of the industry.

A short look at the careers of the current managers of BAE Systems, as well as on their address-books, confirms we are not any longer dealing with a normal corporation, but with a cartel uniting high tech weaponry (BAE Systems, United Defence Industries, Lockheed Martin), with speculative financiers (Lazard Frères, Goldman Sachs, Deutsche Bank), together with raw material cartels (British Petroleum, Shell Oil) with on the ground, private military and security companies[14].

The majority of the private military and security companies has been created or are managed by former militaries or ex-policemen for whom it is big business. Just to give an example MPRI (Military Professional Resources Incorporation) was created by four former generals of the United States Army when they were due for retirement[15]. The same is true for Blackwater and its affiliate companies or subsidiaries, which employ former directors of the C.I.A.[16]. Social Scientists refer to this phenomenon as the Rotating Door Syndrome.

The use of security contractors is expected to grow as American forces shrink. A July report by the Commission on Wartime Contracting, a panel established by Congress, estimated that the State Department alone would need more than double the number of contractors it had protecting the American Embassy and consulates in Iraq.

“Without contractors: (1) the military engagement would have had to be smaller–a strategically problematic alternative; (2) the United States would have had to deploy its finite number of active personnel for even longer tours of duty -a politically dicey and short-sighted option; (3) the United States would have had to consider a civilian draft or boost retention and recruitment by raising military pay significantly–two politically untenable options; or (4) the need for greater commitments from other nations would have arisen and with it, the United States would have had to make more concessions to build and sustain a truly multinational effort. Thus, the tangible differences in the type of war waged, the effect on military personnel, and the need for coalition partners are greatly magnified when the government has the option to supplement its troops with contractors”[17].

The military cannot do without them. There are more contractors over all than actual members of the military serving in the worsening war in Afghanistan.

CONCLUSIONS OF THE SENATE ARMED SERVICES COMMITTEE impact of Private Security Contracting on U.S. Goals in Afghanistan[18]

Conclusion I: The proliferation of private security personnel in Afghanistan is inconsistent with the counterinsurgency strategy. In May 2010 the U.S. Central Command’s Armed Contractor Oversight Directorate reported that there were more than 26,000 private security contractor personnel operating in Afghanistan. Many of those private security personnel are associated with armed groups that operate outside government control.

Conclusion 2: Afghan warlords and strongmen operating as force providers to private security contractors have acted against U.S. and Afghan government interests. Warlords and strongmen associated with U.S.-funded security contractors have been linked to anti Coalition activities, murder, bribery, and kidnapping. The Committee’s examination of the U.S. funded security contract with ArmorGroup at Shindand Airbase in Afghanistan revealed that ArmorGroup relied on a series of warlords to provide armed men to act as security, guards at the Airbase.

Open-ended intergovernmental working group established by the HR Council

Because of their impact in the enjoyment of human rights the Working Group on mercenaries in its 2010 reports to the UN Human Rights Council and General Assembly has recommended a legally binding instrument regulating and monitoring their activities at the national and international level.

The motion to create an open ended intergovernmental working group has been the object of lengthy negotiations, in the Human Rights Council, led by South Africa in order to accommodate the concerns of the Western Group, but primarily those of the United States and the United Kingdom and of a lot a pressure exerted in the capitals of African countries supporting the draft resolution. The text of the resolution was weakened in order to pass the resolution by consensus. But even so the position of the Western States has been a “fin de non recevoir”.

The resolution was adopted by a majority of 32 in favour, 12 against and 3 abstentions. Among the supporters of this initiative are four out of the five members of BRICS (Brazil, Russia, China and South Africa) in addition to the African Group, the Organization of the Islamic Conference and the Arab Group.

The adoption of this resolution opens an interesting process in the UN Human Rights Council where civil society can participate in the elaboration of an international framework on the regulation, monitoring and oversight of the activities of private military and security companies.  The new open ended intergovernmental working group will be the forum for all stakeholders to receive inputs, not only the draft text of a possible convention and the elements elaborated by the UN Working Group on mercenaries but also of other initiatives such as the proposal submitted to the Parliamentary Assembly of the Council of Europe, the Montreux Document and the international code of conduct being elaborated under the Swiss Initiative.

However, the negative vote of the delegations of the Western Group indicates that the interests of the new staggering security industry – its annual market revenue is estimated to be over USD one hundred billion – have been quite well defended as was the case in a number of other occasions. It also shows that Western governments will be absent from the start in a full in-depth discussion of the issues raised by the activities of PMSC.

We urge all States to support the process initiated by the Council by designating their representatives to the new open-ended intergovernmental working group, which will hold its first session in 2011, and to continue a process of discussions regarding a legally binding instrument.

The participation of the UK and USA main exporters of these activities (it is estimated at 70% the industry of security in these two countries) as well as other Western countries where the new industry is expanding is of particular importance.

The Working Group also urges the United States Government to implement the recommendations we made, in particular, to:

support the Congress Stop Outsourcing Security (SOS) Act, which clearly defines the functions which are inherently governmental and that cannot be outsourced to the private sector;

rescind immunity to contractors carrying out activities in other countries under bilateral agreements;

carry out prompt and effective investigation of human rights violations committed by PMSCs and prosecute alleged perpetrators;

ensure that the oversight of private military and security contractors is not outsourced to PMSCs;
establish a specific system of federal licensing of PMSCs for their activities abroad;

set up a vetting procedure for awarding contracts to PMSCs;

ensure that United States criminal jurisdiction applies to private military and security companies contracted by the Government to carry out activities abroad; and

respond to pending communications from the Working Group.

The United Nations Human Rights Council, under the Universal Periodic Review, initiated a review in November 2010 in Geneva, focussing on the human rights record of the United States. The above article is an edited version of the presentation given by Jose L. Gomez del Prado in Geneva on 3 November 2010 at a parallel meeting at the UN Palais des Nations on that occasion.

Notes

[1] Blackwater Worldwide abandoned its tarnished brand name in order to shake its reputation battered by its criticized work in Iraq, renaming its family of two-dozen businesses under the name Xe’, see Mike Baker, ‘Blackwater dumps tarnished brand name’, AP News Break, 13 February 2009.

[2] URG, an Australian private military and security company, uses a number of ex military Chileans to provide security to the Australian Embassy in Baghdad. Recently one of those “private guards” shot himself, ABC News, reported by La Tercera, Chile, 16 September 2010.

[3]J.Mendes & S Mitchell, “Who is Unity Resources Group?”, ABC News Australia, 16 September 2010.

[4] Case 8:08-cv-01696-PJM, Document 103, Filed 07/29/10. Defendants have filed Motions to Dismiss on a number of grounds. They argue, among others, that the suit must be dismissed in its entirety because they are immune under the laws of war, because the suit raises non-justiciable political questions, and because they possess derivative sovereign immunity. They seek dismissal of the state law claims on the basis of government contractor immunity, premised on the notion that Plaintiffs cannot proceed on state law claims, which arise out of combatant activities of the military. The United States District Court for the district of Maryland Greenbelt Division has decided to proceed with the case against L-3 Services, Inc. It has not accepted the motions to dismiss allowing the case to go forward.

[5] Mission to the United States of America, Report of the Working Group on the use of mercenaries, United Nations document, A/HRC/15/25/Add.3, paragraphs 22.

[6] James Risen and Mark Mazzetti, “Blackwater guards tied to secret C.I.A. raids ”, New York Times, 10

December 2009.

[7] Adam Ciralsky, “Tycoon, contractor, soldier, spy”, Vanity Fair, January 2010. See also Claim No. HQ08X02800 in the High Court of Justice, Queen’s Bench Division, Binyam Mohamed v. Jeppesen UK Ltd, report of James Gavin Simpson, 26 May 2009.

[8]ACLU Press Release, UN Report Underscores Lack of Accountability and Oversight for Military and Security Contractors, New York, 14 September 2010.

[9] The reports also indicates that the Revenues of DynCorp for 2006 were of USD 1 966 993 and for 2009 USD 3 101 093

[10] Mission to Ecuador, Report of the Working Group on the use of mercenaries, United Nations document, A/HRC/4/42/Add.2

[11] A number of the persons involved in the attempted coup were arrested in Zimbabwe, other in Equatorial Guinea itself the place where the coup was intended to take place to overthrow the government and put another in its place in order to get the rich resources in oil. In 2004 and 2008 the trials took place in Equatorial Guinea of those arrested in connection with this coup attempt, including of the British citizen Simon Mann and the South African Nick du Toit. The President of Equatorial Guinea pardoned all foreigners linked to this coup attempt in November 2009 by. A number of reports indicated that trials failed to comply with international human rights standards and that some of the accused had been subjected to torture and ill-treatment. The government of Equatorial Guinea has three ongoing trials in the United Kingdom, Spain and Lebanon against the persons who were behind the attempted coup.
[12] Report of the Working Group on the use of mercenaries, Mission to Honduras, United Nations document A/HRC/4/42/Add.1.
[13] Wikipedia
[14] Mercenaries without borders by Karel Vereycken,  Friday Sep 21st, 2007
[15] Among which General Carl E. Vuono, Chief of the Army during the Gulf War and the invasion of Panama; General Crosbie E. Saint, former Commander in Chief of the  USA Army in Europe and General Ron Griffith. The President of MPRI is General Bantant J. Craddock.

[16] Such as Cofer Black, former Chief of the Counter Terrorism Center; Enrique Prado, former Chief of Operations and Rof Richter, second in command of the Clandestine Services of the Company
[17] Article published in the Spring 2010 issue of the University of Chicago Law Review, titled “Privatization’s Pretensions” by Jon D. Michaels, Acting Professor of Law at the UCLA School of Law
[18] INQUIRY INTO THE ROLE AND OVERSIGHT OF PRIVATE SECURITY CONTRACTORS IN AFGHANISTAN, R E P O R T TOGETHER WITH ADDITIONAL VIEWS OF THE COMMITTEE ON ARMED SERVICES UNITED STATES SENATE, 28 September 2010

‘War weary’ Taliban may form political party

Published time: March 04, 2013 20:52

Members of the Taliban (Reuters/Parwiz)

The Afghan Taliban are considering a political solution to the decade long conflict, a senior Taliban leader has said, amid speculation that the Taliban may be becoming war weary.

“We must launch a political movement to achieve the goals for which we have made so many sacrifices. The Taliban leaders whose names have been removed from the UN black list will play an important role in the political process,” Mullah Agha Jan Mutasim, a close confident of the militant groups elusive leader Mullah Omar and the former head of the Taliban Political Commission, told the Pakistani newspaper the Express Tribune. 

However, he added that the warring faction was a “vital part of the Taliban”.

The Taliban have said numerous times that they will not talk to the administration of Afghan president Hamid Karzai, who they’ve said was a US puppet. But political analysts believe that the Taliban are tired of waging war.

“The Taliban are tired of war and it will be a step in the right direction if they launch a political movement,” Rashid Waziri, an advisor at the Regional Studies Center of Afghanistan, told the Express Tribune on Sunday.

Pakistan, which has some influence over the Afghan Taliban, recently sent Maulana Rehman, an influential political-religious leader, to meet Taliban representatives in Qatar to help broker peace talks between the militants and the Karzai administration, although officially both sides denied the meeting.

Mullah Agha Jan Mutasim (AFP Photo / STR)

The unofficial talks in Doha, mark the latest efforts at a negotiated settlement with the Taliban.

As 2014 approaches – the date when most NATO troops will leave Afghanistan – the US is pushing for an Afghan led solution and for peace talks between the Afghan government and the insurgency. 

They also want to get Pakistan on board with any eventual settlement. Pakistan has long been a negative influence on the situation, enabling Taliban groups to operate from its territory while at the same time refusing to support negotiations.

Tony Gosling, an investigative journalist based in Bristol in the UK, believes the Taliban are serious about a political solution and that they have more influence in the country than the Karzai government.

“The Taliban have more influence than Karzai does. If elections in Afghanistan were free and fair, the Taliban might well do very well,” he told RT.

He also said that the west is trying to bring them into the political arena, as it now has little other option.

“We know that this has been going on behind the scenes since the beginning of the occupation. As the cost of the war gets higher and higher and cuts to the defense budget begin to bite, other options are being considered by the occupying powers,” said Gosling.

American military commanders concluded some time ago that the Afghan war could only end in a negotiated settlement with the Taliban and not an outright military victory. However talks between the Taliban and the US in 2012 ended in failure.

The talks stalled because the US administration could not complete a proposed prisoner swap for five Taliban members in Guantanamo to be exchanged for the one US soldier in captivity in Afghanistan, Sergeant Bowe Bergdhal.

The swap, which was scuppered by opposition from both parties in Congress, has made more serious talks difficult to envisage.

Reuters / Mohammad Shoib

The Taliban are also internally divided particularly between their political wing and their military commanders, who were critical of the existence of talks.

They are also unwilling to meet Washington’s demands to sever ties with Al Qaida, renounce violence and accept the commitments to political and human rights in Afghanistan’s Constitution.

But despite all these setbacks the Qataris remain willing to host the talks and one of the Taliban negotiators who is still in Doha has said that talks could restart as soon as the prisoner swap takes place and the insurgents are allowed to open an office in Doha.

If this happens “and practical steps are taken by the United States of America, talks will resume. There is no other obstruction,” Sohail Shaheen, a Taliban negotiator, told Japan’s NHK World TV last month.

Gosling believes that when NATO troops have gone and negotiations are underway between the Taliban and the Afghan government, there is a chance of peace in the country, although there may be problems in the short term.

“What’s happening in Pakistan and Iraq with frequent sectarian bombings, there is a likelihood of this happening in Afghanistan. But ultimately, if Afghanistan were left alone, it may turn into a more peaceful regime,” he said.

Greek Military Prepares for Mass Repression

GREECE

Former high-level Greek diplomat Leonidas Chrysanthopoulos told the UK’s New Statesman last week that discussions had taken place between senior Greek politicians and the armed forces on the military’s response to what Chrysanthopoulos described as an “explosion of social unrest” expected to occur “quite soon.”

Chrysanthopoulos said that in the coming months, “There will be further increases in armed actions. There will be bloody demonstrations.”

Without giving details, he said, “There are contacts by certain politicians with elements in the armed forces to guarantee that in the event of major social unrest, the army will not intervene.”

This last claim was likely made for public consumption. Even if such a request had been made, any assurances from the Greek military would be worthless given the recent history of the country, in which the “regime of the colonels” seized power in a military coup in 1967 that lasted until 1974. Since the onset of mass austerity in Greece in 2010 there have been constant rumours of coup discussions among high-ranking military personnel.

The most significant aspect of Chrysanthopoulos’ interview is the revelation of discussions between politicians and the military on how to respond to the threat of social revolution.

Greek ruling circles are working on the assumption that insurrectionary struggles are inevitable because of the intolerable level of suffering they have imposed on the working class. Within less than four years, the social position of the Greek working class has been reduced to levels not seen since the Nazi occupation during World War II.

Brutal poverty is a fact of life for millions. One major aspect of the assault on living conditions is the removal of public health provisions.

More than 50 pharmaceutical conglomerates have either halted or savagely cut supplies to Greece—citing concerns for their profits. The dangerous shortage of hundreds of basic medicines is resulting in chaotic scenes of patients rushing from one pharmacy to another in search of vital drugs, while public hospitals lack adequate supplies of drugs to dispense.

Such conduct is not confined to the big pharmaceutical companies. On Tuesday it emerged that the Swiss Red Cross, a non-profit relief agency, is set to slash the number of blood donor packets it supplies to Greece. It cited concerns that it has not received full payment for previous allocations and announced that beginning in 2015 the number of blood donor packets it sends to Greece will be halved from the current annual level of 28,000.

As a result of the austerity policies demanded by the “troika” (the International Monetary Fund, European Central Bank and European Union), a staggering 4.65 million people are now either unemployed or economically inactive. There are 450,000 households in which no one is employed. Of the 2.6 million people employed in the private sector in 2010, 900,000 have been laid off. Because the duration of benefits has been slashed, just 225,000 of the unemployed now receive unemployment pay.

In the private sector, just 600,000 workers (from a total 1.6 million) now work a regularly paid eight-hour day. Professor Savas Robolis of the University of Panteion in Athens recently said, “The remainder—a million workers—have had their hours cut or are getting paid late, four or five months late. They are in a state of desperation.”

This week’s annual report by the Bank of Greece found that 23 percent of the population lived below the poverty line in 2012, compared to 16 percent in 2011. Also noted was the exponential increase in child poverty, with the rate of families at risk reaching 31 percent in just one year (2010-2011). In the period 2010-2012, the average gross salary in the country was cut by 20.6 percent and labour costs for employers decreased by 18.5 percent.

Given the austerity measures already in place, there will be an overall reduction in labour costs in Greece for the period 2012-2014 of 17.6 percent. So savage are these measures that they are set to surpass the 15 percent reduction in overall costs demanded by the troika.

Presenting the report, the bank’s chairman, George Provopoulos, claimed that economic recovery would be achieved by means of austerity and demanded that even harsher measures be imposed. “Now that the finishing line is finally visible,” he said, “we ought to intensify efforts, to quicken our pace to cover the final stretch and ensure that citizens’ sacrifices have not been in vain…”

Speaking of the victims of these policies, he declared, “Extreme and unreasonable demands from social groups do not contribute towards this goal.”

The bank’s report was issued as representatives of the troika once again converged on Athens to monitor the implementation of the programme agreed with the New Democracy/PASOK/Democratic Left government.

Among the issues to be settled is how steeply this year’s pharmaceutical budget is to be slashed. As a result of previous troika demands, the budget was cut from €3.7 billion to €2.4 billion last year. Reports suggest it could be cut to €2 billion this year.

With pharmaceutical firms already withholding many drugs, this is a prescription for a health catastrophe and many needless deaths.

The troika is also set to demand a speedup in the layoff of 25,000 public sector workers this year (half by June) in order to meet the agreed 150,000 redundancies by 2015. If Athens were to fail to impose the cuts to the troika’s satisfaction, two tranches of loans for March and April totalling €8.8 billion would be withheld or much reduced. Failure to receive the finance would result in Greece defaulting on its entire debt.

By promising if elected to reverse the austerity programme, SYRIZA (Coalition of the Radical Left) won nearly 30 percent of the vote in last year’s election. It is put forward by a host of pseudo-left organizations as a progressive alternative to the pro-austerity governing parties and the means for countering the growth of the fascist Golden Dawn movement.

In reality, SYRIZA is no less a creature of the ruling elite than the right-wing New Democracy party, and is no less wedded to the austerity agenda. This week, SYRIZA press spokesman Panos Skourletis stated, “We do not have a magic wand that will improve and change the situation from one day to the next… We must realize that with every day this policy is applied, things grow worse. This devastation is incalculable and, therefore, restoration of the repercussions of this policy becomes even more difficult.”

The meaning of such comments—that it is impossible to reverse the austerity programme—is unmistakable. SYRIZA is readying its arguments and preparing for what it will be called on to carry out if it achieves its goal of entering a future anti-working class government.

Left To Die – The Government’s Policy On Homelessness

Over 50,000 people are homeless in the UK, and that number is increasing. There are approximately 710,000 empty homes in the UK – enough to house a million people.

A Failure Analysis of the US Economy

Introduction

As failure analysis engineers for companies, our job is to find the root cause of failure and recommend changes in design, process, tests, etc. to fix the problem. This type of analysis has become an important part of semiconductor mass production, which makes electronics cheaper and affordable for consumers. At the same time, mass production helps the manufacturer / producer of parts by increasing their profits.

“Workers should be able to work for fewer hours to achieve their production target. They could use their spare time to pursue higher education, leisure, hobbies, vocational training, etc.”

What we need to recognize is that both producers and consumers are vital for the semiconductor industry. Without a healthy demand for the latest electronic gadgets such as smartphones, tablet PCs, hybrid cars, etc. there would be no incentive for global semiconductor firms to keep investing in the research and development of new technologies that improve the quality of life. While we make a living through the failure analysis of modern-day electronics and keep our jobs, pay for mortgages, groceries, utilities, cars, etc., we also contribute to the demand for other goods by spending our wages. We are workers on one side and consumers on the other. Consumer spending helps create jobs for other services and 70% of the US economy depends on consumer spending [1]. It is the consumer’s purchasing capacity that is the best metric of economic performance.

Common Sense Macroeconomics

Producers and Consumers are like two wings of a bird. If either of the wings gets hurt, the bird will no longer be able to fly. If that bird is not nursed quickly and properly, it would be disabled and either die from hunger or fall prey to a predator. With the same analogy, both producers and consumers have to prosper for a robust economy.

Before we get into more details of macro-economics, let us see where the economic profession stands at this juncture. In a recent article in The New York Times, Professor Robert J. Shiller of Yale University and a best-selling author argues that even now we don’t understand what really causes a recession and layoffs [2]. But another best-selling economist, Professor Ravi Batra, seems to have solved the puzzle of recessions by offering a new theory of unemployment. His theory relies on common sense as he argues that recessions and depressions occur when worker productivity keeps rising faster than the economy’s average real wage. He demonstrates that this happened in the 1920s, which were followed by a depression. The same thing also occurred during the 2000s and the world has been in The Great Recession since 2007.

Batra argues that worker productivity is the main source of supply while wages are the main source of demand. If productivity rises faster than wages, then supply rises faster than demand. This results in overproduction and forces the manufacturer to fire workers. Producers are the suppliers of goods, and consumers generate the demand for these goods. Consumer demand, being dependent on wages, is sustainable only if the consumers as workers earn higher salaries. If the wages of consumers do not catch up with increased supply of goods, the supplier of goods is unable to sell all that he/she has manufactured.

Let us take an example of the semiconductor industry where the semiconductor wafer foundries manufacture tens of thousands of wafers per month. These facilities supply silicon for the semiconductor industry. For a wafer fabrication facility to be profitable, it has to be able to produce as many wafers as possible that meet the Statistical Process Control (SPC) stability metrics and customers’ quality requirements when it comes to DPPM (Defective Parts per Million). This ability to mass produce is measured by the productivity of the work force. A wafer foundry, like every other company, wants its employees to be highly productive to maintain a high supply of wafers for its customers. The wafer fab management pays incentives based on productivity.

Now, where does the need come for wafer fab to hire more workers? This occurs only if wafer fab customers demand more goods. Where does the customer demand come from? It comes from the wages of the people. When we have an economy where employed people have high wages or high purchasing capacity, they are able to generate a high demand for goods. Hence, the wages of the workers have to catch up with their productivity. If employees are very productive, that is they work hard and efficiently, they are able to increase the supply of goods into economy with their productivity. Now, what happens if the wages of the productive workers fail to catch up with their productivity? As a result of the growing gap between wages and productivity, eventually the purchasing capacity of the workers is not able to catch up with the amount of goods that are being manufactured by them. Hence this correlates to a gap between the supply of goods and the sustainable demand for them. In other words, the wage-productivity gap causes a supply-demand gap.

In my previous analogy, this hurts one of the two wings of a bird. In other words, the imbalance between oversupply of goods and weak demand for them leads to layoffs at the wafer fabrication facility. This is how an economy is so closely connected to maintaining a sustainable supply and demand of goods. Thus layoffs occur when people’s purchasing capacity falls short of the goods that workers produce due to their high productivity.

Consumer and National Debt

Some brilliant minds have devised a way to keep the wages of workers to remain the same or even fall, i.e. not letting wages catch up with their high productivity, but still maintain a high consumer demand. They do this by creating ‘consumer debt’. When a consumer is unable to buy much out of their real salary or wage, he/she can buy it using a credit card or by going into debt with a loan from financial institutions. While relatively stable consumer debt is good for the economy as long as the borrower is able to repay his/her debt within the allotted time frame with interest, what can consumers do when they lose their jobs in a recession, and are not able to find other employment soon? If the consumer is not able to repay his/her debt in time, the increase in interest on the credit card loan wipes out his/her savings, thereby resulting in bankruptcy.

It should be clear that when wages trail productivity, the overall economy suffers because of the reduced purchasing capacity of unemployed workers. If you follow this logic, then it is evident that consumer’s purchasing capacity is critical for sustainable demand. Hence, I consider a strong consumer purchasing capacity to be the chief source of high consumer demand, which acts as an engine for economic growth. Thus, the real job creators in a free market economy are not only the producers of goods but also the consumers of goods. Every company estimates its consumer base prior to manufacturing in order to avoid the over-production of goods. Hence, if consumer demand keeps on weakening, then the economy goes into a recession. In that case to avoid a depression, the government has to step in and increase its own spending that makes up for the loss in demand due to lost wages of the laid off workers. The government may also cut tax rates to boost consumer demand. In either case, the budget deficit rises, and may rise very sharply if the wage-productivity gap and hence the supply-demand gap are very high. This is the main reason why the budget deficit rocketed after 2007, so much so that it almost tripled from about $500 billion in 2007 to $1.3 trillion in 2011.

Now, if government spending creates jobs, then these workers can jump start the engine of economic growth by paying off their debts and boosting consumer demand through their real wages. The higher the wages of these workers, the higher will be their purchasing capacity and the higher the consumer demand. This would act as an incentive to the producers/manufacturers to make further investments.

However, if increased government spending does not boost consumer demand and instead goes into the pockets of manufacturers, the manufacturing sector may hire a few more workers because of the extra money it receives from the government stimulus, but that growth will not be sustainable. In fact, a case can be made that the high budget deficit of recent years has mainly helped the manufacturer. For instance, in 2011 the economy generated 1 million new jobs with the help of a budget deficit of $1.3 trillion. If you divide 1.3 trillion with 1 million, you get 1.3 million. In other words, the government spent an extra $1.3 million to create one job in the economy. Is this not absurd, given the fact that the average wage is only $50,000 per year? Thus, the government deficit is now mainly helping the manufacturers, who must be getting the difference between $1.3 million and $50,000 for each person they hire.

As Batra shows, this is what the continued rise in the wage-productivity gap does to an economy. Just 15 years ago, in 1999, we had a budget surplus along with an unemployment rate of less than 5 percent. Today, we have a trillion dollar deficit along with an unemployment rate close to 8 percent.

Free Trade vs Fair Trade

An economy is sustainable when it is able to balance its trade and budget. If any country has a trade deficit (where imports are larger than exports), it leads to a fall in the country’s FOREX (FOREign eXchange) reserves (which eventually depreciates its currency). The value of a country’s currency is a deciding factor in the standard of living. Hence, a country cannot run year-over-year trade deficits if it wishes to maintain the standard of living of its citizens. Also, high trade deficits result in loss of FOREX reserves, which are important as they determine the buying power of the country’s currency.

Let us take an example of a country ‘A’ where its population has sufficient purchasing power and can buy everything produced in the nation. But there are some products that are not produced at home and have to be imported from another country ‘B’. Hence country ‘A’ has to pay money [its currency] to buy country B’s goods. Either country ‘A’ has to balance its trade by getting country ‘B’ currency from a third country ‘C’, or go on printing its own currency. But there is a limit that country ‘B’ will accept country ‘A”s money. After that country ‘A’ will have to produce the items within the country, causing huge inflation due to depreciated value of its currency resulting from excess money printing. It is possible to avoid trade deficits through balanced trade policies. Fair trade is more important than Free trade. Free trade implies no import duties imposed by a country on its imported goods. While Free trade works great when trading with countries having nearly similar value of their monetary currencies, it results in high trade deficits when multinational corporations (MNCs) from a rich country make goods for cheap in another country with a significantly lower value of its currency. The MNCs in the United States prefer to manufacture things in low wage countries with cheap currencies, as it is highly profitable. However, in addition to increasing trade deficits, this practice also leads to massive job losses in the home country, especially when jobs are also outsourced.

As a result of this free trade policy, the U.S. economy has been running over half a trillion dollar trade deficit for the past four years [3].While such a deficit results in higher corporate profits for MNCs in the United States, it results in depreciating FOREX reserves. This threatens the economic independence of the U.S. as a country.

Figure 1 below shows the FOREX reserves of BRIC (Brazil, Russia, India and China) in USD over ten years. According to Dr. Richard Haas, Chairman of the Council of Foreign Relations, China’s ownership of trillions in FOREX is a great threat to the United States, as China, with vast FOREX reserves, is in a position to influence US foreign policies through its control over the value of US currency [4].This is similar to the way the United States was able to dominate the foreign policies of Britain and France after World War II and forced their troop withdrawal during the Suez crisis purely because of its ownership of British and French debt [5].

030213-6aFigure 1: World Forex reserves in billions of USD as per International Monetary Fund (IMF), April 2009 [6]

During the Reagan years, the trade deficit started to increase at a rate not seen in the last 60-70 years [7]. The Reagan administration then had to pressure Japan to sign the 1985 Plaza Accord to devalue the U.S. dollar at the expense of the Japanese yen in order to increase U.S. exports [8]. As a result of yen’s appreciation, Japan experienced an economic crash and lost a decade of growth. The Nikkei average went up to about 39,000 in December 1989, but after the crash it hovered around 15,000 during the lost decade of the 1990s. In the last several years it has dropped even more, hovering around 10,000 [9].

Looking at the fate of what happened to Japan as a result of the yen appreciation; China has refused to appreciate its currency significantly in spite of the pressure by the Obama administration, which hopes to boost U.S. exports to China [10]. This should be a great concern for the United States because it would not be able to export significant amount of goods to China to balance its trade.

Counterfeit Electronics as a Threat to US National Security

In addition to nearly 600 billion dollars in trade deficit due to free trade policies, the counterfeit electronics from China entering into the U.S. supply chain have become a national security threat [11]. Initially, the United States manufactured all defense-related products at home. However, consumer electronics were being built in China due to its low cost of labor. As technology progressed to advanced transistor technology, it required a large investment from defense contractors, who work for profit, to manufacture semiconductor wafers in the United States. Hence, several defense contractors started to use Chinese built ICs for military weapons like missiles and machine guns. Along with the state-of-the-art infrastructure, the technical know-how to make advanced technology products has also been transferred to China.

So now China is flooding the U.S. defense supply chain with counterfeit ICs [12]. It has become very costly to prevent this, which is also eating away profits of U.S. defense contractors. The free trade policies of the United States are creating a perfect storm for its semiconductor industry. According to Professor Ravi Batra, “Free trade has done to the United States what Hitler and Imperial Japan could not do during the war.” He characterizes free trade as the ‘Agrification syndrome’ by which Americans continue to lose manufacturing jobs, and continue to work harder at the jobs they do have, but suffer declining wages, despite increases to their productivity [13].

If the United States had adopted fair trade instead of free trade, it would have imposed tariffs on the cheap goods that are dumped in this country by China. As people prefer to get the best value for their money, U.S. consumers would have preferred to buy U.S. made goods as tariffs would make them competitive with Chinese goods. This way manufacturing jobs would have been preserved. Simple math shows that by just eliminating the 600 billion dollar annual trade deficit would create 6 million jobs paying a $100,000 salary every year. This is a simple job creation strategy, as the country faces the highest unemployment rate since the Great Depression.

030213-6bFigure 2: BLS, BEA Census- Productivity and real income index from 1964-2008 relative to 1970 (Source: David Ruccio: Graph of the week: USA productivity and real hourly wages 1964-2008 [14])

Economic Reforms

If you observe Fig. 2 above, real wages have failed to keep up with productivity since the 1970s. The productivity of American workers has been consistently increasing. However, the average household median income has not increased at the rate at which productivity has increased. The real hourly wages have remained fairly constant. The United States needs to reform its current economic model so that wages keep track with the productivity of workers [15]. Professor Batra argues that this can happen only in a free market system, where companies are small and unable to control prices. In such a system, there would be no need for the government budget deficit, and it would raise the living standard for every individual in society.

Under this system, the majority of shares of corporations would be owned by its employees rather than by a few investors on Wall Street. When workers become majority shareholders, they know that they are part owners of the company and will be fairly rewarded for hard work. By being highly productive, these workers would receive a fair share of corporate profits.

The system would still preserve the incentive for growth because hard work would bring higher incomes. At the same time, it would avoid severe recessions and depressions caused by poor consumer demand (due to a huge gap between wages and productivity resulting in poor purchasing capacity of the majority of consumers). Also, in economic downturns, it will be possible to cut back the working hours of the workers and reduce their wages across the board rather than lay off some workers. This would minimize, if not eliminate, the problem of high unemployment [16].

Modern economic thinkers blame automation as a major cause of job losses. Technology could be productively utilized in such a way that the manufacturing sector could cut back on work hours while paying workers a high wage due to their high productivity. This is because automation enables a worker to be very productive through use of machines to manufacture products. High worker productivity significantly increases the supply of goods in an economy. As a result workers would be able to work for fewer hours to achieve their production target. They could use their spare time to pursue higher education, leisure, hobbies, vocational training, etc. This way it is also possible to minimize, if not eliminate, the problem of high unemployment resulting from automation while still keeping the supply of goods proportionate to consumer demand.

Employee guided firms will also be able provide health insurance and pension benefits to workers and the government would not need to spend money for this purpose. This way the budget deficit would fall to zero and the national debt could be retired over time.
Additionally, it would also avoid undue pressure from Wall Street to ship jobs overseas under pressure of delivering maximum profits to Wall Street investors. This would minimize speculation, malpractices and economic bubbles through economic self-regulation with minimal government interference.

References:

1. http://en.wikipedia.org/wiki/Consumer_spending

2. Robert J. Shiller: “The Mystery of Economic Recessions”, New York Times, 4 February 2001. p. 17 http://cowles.econ.yale.edu/news/shiller/rjs_01-02-01_nyt_mystery.htm

3. Martin Crutsinger: “US deficit tops $1 trillion for fourth year,” Associated Press, 12 October 2012. http://finance.yahoo.com/news/us-deficit-tops-1-trillion-fourth-011445884–finance.html

4. Justin Webb, “Don’t be distracted by Greece : Americans must also face financial facts, ” Telegraph (UK), 25 June 2011. http://www.telegraph.co.uk/news/worldnews/us-politics/8598451/Dont-be-distracted-by-Greece-Americans-must-also-face-financial-facts.html

5. Laurie Milner, The Suez Crisis, 03 March 2011. http://www.bbc.co.uk/history/british/modern/suez_01.shtml

6. http://en.wikipedia.org/wiki/Foreign-exchange_reserves

7. Alex Seitz-Wald: 10 Things Conservatives Don’t Want You To Know About Ronald Reagan, 5 February 2011. http://thinkprogress.org/politics/2011/02/05/142288/reagan-centennial/?mobile=nc

8. http://en.wikipedia.org/wiki/Plaza_Accord

9. http://en.wikipedia.org/wiki/Lost_Decade_(Japan)

10. China seeks to learn from mistakes of 1985 Plaza Accord, The Japan Times, 9 September 2006. http://www.japantimes.co.jp/text/nb20060909a3.html

11. Richard Dudley: Counterfeit Electronics in DoD are Widespread and Threaten National Security, 3 June 2012. http://defense-update.com/20120603_counterfeit-electronics-in-dod-are-widespread-and-threaten-national-security.html

12. Joseph Farah: Fake Chinese electronics threaten U.S. Defense. 29 May 2012. http://www.wnd.com/2012/05/fake-electronics-feared-undermining-u-s-defense/

13. Sean Fenley: Barack Obama, What’s Wrong with Protectionism?, 21 September 2008. http://www.opednews.com/articles/Barack-Obama-What-s-Wrong-by-Sean-Fenley-080918-200.html

14. David Ruccio: Graph of the week: USA productivity and real hourly wages 1964-2008. http://rwer.wordpress.com/2010/11/20/graph-of-the-week-usa-productivity-and-real-hourly-wages-1964-2008/

15. Ravi Batra: The New Golden Age : The Coming Revolution against Political Corruption and Economic Chaos, New York, Palgrave Macmillan, 2007. Also see ravibatra.com for Batra’s other writings.

16. P.R.Sarkar : PROUT in a Nutshell, AMPS.

Cut Benefits, Not The Military

The Defence Secretary has told George Osborne the military cannot cope with any more cuts - so the welfare budget should be slashed instead. Philip Hammond has warned he will resist further cuts to his department in the next spending review. In an int...

‘I’m Not A Dictator, I Can’t Block The Door, I Can’t Use Jedi Mind...

The frustration at his administration's failure to agree a deal on radical spending cuts, due to go into force at midnight on Friday, has finally got to Barack Obama, with the President telling a White House press conference that he is "not a dictator...

‘Medical stocks are down by 90 percent’: Greece accuses pharma giants of slashing imports

Published time: February 28, 2013 01:36

AFP Photo / Louisa Gouliamaki

The Greek government has reportedly accused 50 leading pharmaceutical companies of cutting off supplies of key medications to the country, sparking a run on pharmacies. Drug companies say the cheap medicines they supply merely get re-exported at a profit.

Pfizer, Roche, GSK and AstraZeneca are among the producers the government says have either stopped providing certain medicines to the debt-stricken country, or plan to do so, according to the UK’s Guardian newspaper. Pfizer and Roche admit that they have done so, but GSK and AstraZeneca deny that they have reduced supplies so far.

"It's a disgrace. The government is panic-stricken and the multinationals only think about themselves,” said Dimitris Karageorgiou, secretary of the Panhellenic Pharmaceutical Association.

As the news has spread, patients with prescriptions for antibiotics, statins and other medicines totalling over 200 brand names, began queuing outside pharmacies.

“I would say supplies are down by 90%,” said Karageorgiou.

“The companies are ensuring that they come in dribs and drabs to avoid prosecution. Everyone is really frightened. Customers tell me they are afraid of losing access to medication altogether.”

But the multinationals say the government’s own lack of regulation has created this crisis, which has been more than two years in the making.

Under the current system, individuals in Greece buy medicines from pharmacies, and are later reimbursed by the state, with the state setting the prices the drug stores can charge. In the wake of the country’s financial crisis, the government ordered its pharmacies to sell drugs at much lower prices, to cut down its own budget expenditure.

But as Greek prices are now 20 percent below the next-cheapest country in Europe, this has created an incentive for pharmacists to simply re-sell drugs to other countries in the EU, creating a “parallel trade”. The health ministry estimates that over 25 percent of all drugs entering Greece are then re-exported.

Pharmaceutical companies have already lowered their prices for the Greek market, but are now saying that the re-export is starting to eat into their profits in other European countries.

They also point out that as well as paying less, Greek insurance funds and hospitals owe €1.9 billion to drug manufacturers.

"We are insisting that the public hospitals fulfil their contracts and this is something we do in any country … We are withholding medicines until they meet their obligations," said Daniel Grotsky, a Roche spokesman.

The Swiss company is owed €200 million. Grotsky said Roche is still supplying individual pharmacies, and only drugs where alternatives are available have been held back.

Frouzis Konstantinos, of Novartis, another drug giant, says the government needs to pay up its existing debt, and stop squeezing the profit margins of pharmacies.

"The government needs to correct these wrong prices to avoid a surge of exportation,” he told the Guardian.

But this is unlikely.

Under the austerity budget the state’s allocation for medicines has fallen from €3.7 billion in 2011 to €2.44 last year, and the number for 2013 is likely to be even lower.

Instead, the government has banned exports of more than 60 drugs altogether, and says it will levy fines of between €2,000 and €20,000 on those pharmacies that re-export illegally. 


Mehdi’s Morning Memo: ‘Shall We Leave It At That?’

The ten things you need to know on Wednesday 27 February 2013...

1) 'SHALL WE LEAVE IT AT THAT?'

The Rennard affair rumbles on - with more and more seemingly contradictory statements being issued by the various Lib Dem players. Consider this story on the front of the Telegraph:

"Nick Clegg was personally warned by one of his MPs that a senior figure in the Liberal Democrats might be sexually molesting female members of staff, The Daily Telegraph can disclose.

"Sandra Gidley, a former MP and party spokesman, said she told Mr Clegg about the allegations surrounding Lord Rennard, the party's former chief executive, after he was elected as Lib Dem leader in 2007.

"... Asked by The Daily Telegraph whether she told Mr Clegg 'face–to–face' about the allegations concerning Lord Rennard, she said: 'Yes, that is true but at this point I don't want to go any further. I am hoping his memory might be jogged. Shall we leave it at that?'"

Well, um, er, no. Especially since Clegg and Danny Alexander have both claimed that the latter once confronted Rennard over those 'general' allegations while Rennard himself issued a statement yesterday, via a spokesperson, saying "in 27 years of working for the Liberal Democrats he received no complaint or allegation about his behaviour".

As my colleague Ned Simons notes, they can't both be right, can they?

(On a side note, Ned also tried tracking down the seven female Lib Dem MPs to ask them why they've been so conspicuously silent on the Rennard allegations... check out what he discovered here.)

2) GOING NEGATIVE

Who says policy-makers are running out of ideas to prompt a much-needed economic recovery? From the Express:

"Interest rates could be slashed to below zero to kick–start Britain's economy, the Bank of England's Deputy Governor has suggested.

"Paul Tucker admitted his idea was 'extraordinary' but said radical steps were needed to encourage banks to lend more.

"If rates went below zero, in effect becoming negative, the main financial institutions would have to pay the Bank of England a fee for holding their money.

"It is thought this would force banks to lend more cash to small businesses, a move which many believe holds the key to getting the economy moving again."

3) WINDFALL TAX?

Given the size of the budget deficit, and the shortfall in tax revenues, how about a 1997-style windfall tax on the utilities?

This morning, the BBC reports:

"British Gas has said its profits have risen because a colder 2012 meant people used more gas.

"It reported profits from residential energy supply of £606m for 2012, up 11% from the previous year.

"... Centrica, which owns British Gas, reported an adjusted operating profit of £2.7bn for 2012, up 14% from 2011."

4) WE'RE ALL IN THIS TOGETHER, PART 99

"Barclays to reveal that it employs more than 600 millionaires," says the headline in the Independent.

Bonus tax, anyone? The paper reports:

"Next week, the bank will - for the first time - put an exact figure on the number of staff who enjoy seven-figure salaries made up of basic pay, an annual bonus and shares issued through long-term incentive plans. It is understood that this number will be "around" 600 with most of them believed to work for Barclays Investment Bank, which is currently run by the flamboyant racehorse owner Rich Ricci, who will be among their number."

If I was a banker, I wouldn't want to be named Rich Ricci...

5) EYE ON EASTLEIGH

The Eastleigh by-election campaign enters its final day (woo-hoo!), with all four parties in the race making one last, concerted push for votes.

But the Guardian's John Harris, reporting from Eastleigh, concludes:

"For everybody's sake, it is perhaps time that all this was over. Back in the town centre, I seek peace and quiet in the obligatory branch of Costa Coffee. One of the baristas has spent the last three weeks serving endless politicians, aides and activists. 'Hundreds of them,' she says. 'And I'm sick of it.' Like other locals, she mentions cold calls, piles of leaflets and in-person visits. 'I don't bother answering the door any more,' she says, as another canvassing team trudges in for coffee. 'I can't be arsed.'"

Meanwhile, his Guardian colleague Steve Morris reports that, during a walkabout in Eastleigh yesterday, former Lib Dem leader Paddy Ashdown "was heckled by one former Lib Dem voter, library worker Jayne Perkins, who shouted at the Lib Dem entourage: 'Thank you so much for lying to the people of Eastleigh.'"

BECAUSE YOU'VE READ THIS FAR...

Watch this mash-up video - 'Argo' meets 'Home Alone'. Hilarious...

6) 'ILL INFORMED'

From the BBC:

"Ofsted's chief inspector says he wants some school governors in England to be paid and to provide more professional leadership.

"Sir Michael Wilshaw is to launch an online at-a-glance report card for each school, which he wants governors to use to hold head teachers to account.

"He is also set to attack governors who are 'ill-informed' and 'not able to make good decisions'."

7) HELP! THE ROMANIANS ARE COMING!!

Anti-immigration campaigners will be delighted by this report in the Telegraph:

"Up to one in three Romanian migrants has been arrested, according to figures which show the country is ranked second for foreigners held over serious offences.

"Some 27,725 Romanians were arrested for offences in London in five years, Scotland Yard said, including 10 for murder and more than 140 for rape. The figures, published under the Freedom of Information Act, will add to fears of a crime wave when restrictions on workers from Romania and Bulgaria are lifted next January.

"Romanians were second only to Poles, who accounted for 34,905 arrests."

8) RESIGN!

From the Telegraph:

"Several Cabinet ministers privately believe that Sir David Nicholson should stand aside as the head of the NHS because of the Mid Staffordshire scandal, The Daily Telegraph can disclose.

"One Cabinet minister said Sir David’s position was 'completely unacceptable' and symbolised how the Civil Service did not penalise failure.

"Several ministers are understood to have raised 'very serious concerns' about Sir David but the Prime Minister has been advised by the head of the Civil Service that the NHS would be destabilised by his removal."

9) HE'S GAY. OH WAIT. HE ISN'T.

From the Daily Mail:

"John Bercow was left squirming with embarrassment after mistakenly describing former England rugby star Ben Cohen as 'openly gay'.

"The Commons Speaker made the slip-up as he introduced Cohen to a room full of guests at ParliOut, Parliament's gay staff network.

"Cohen, 34, is happily married to Abigail and they have five-year-old twin daughters."

10) TWO POPES?

The Vatican seems to be taking a leaf out of the US political playbook - in the United States, former presidents, governors and senators get to keep their titles for life (hence 'Mr President' in reference to Bill Clinton and George W Bush, even now...).

And now, as the Telegraph reports:

"Pope Benedict XVI will continue to wear a white cassock and will be known as 'Pope Emeritus', adding further confusion to his status after he steps down tomorrow. The 85–year–old German Pontiff will continue to be addressed as 'His Holiness' after he goes into retirement within the Vatican, the same honorific the new pope will enjoy."

PUBLIC OPINION WATCH

From the Sun/YouGov poll:

Labour 42
Conservatives 32
Lib Dems 12
Ukip 9

That would give Labour a majority of 112.

140 CHARACTERS OR LESS

@BBCJLandale Tory MP to me: "Only the Liberals could have a sex scandal that doesn't involve sex and turn it into a leadership crisis."

@simonblackwell If Nick Clegg's not careful he might begin to be seen as in some way untrustworthy.

@ChrisBryantMP Argo is great despite the lie about British refusal to accept six US diplomats.

900 WORDS OR MORE

Danny Finkelstein, writing in the Times, says: "The Lib Dems are not a serious national party."

Mary Riddell, writing in the Telegraph, says: "If Nick Clegg’s story won’t stand up, the Lord Rennard scandal could finish him."

Seumas Milne, writing in the Guardian, says: "George Osborne hasn't just failed – this is an economic disaster."


Got something you want to share? Please send any stories/tips/quotes/pix/plugs/gossip to Mehdi Hasan (mehdi.hasan@huffingtonpost.com) or Ned Simons (ned.simons@huffingtonpost.com). You can also follow us on Twitter: @mehdirhasan, @nedsimons and @huffpostukpol

US Sponsored Coup d’Etat: The Destabilization of Haiti

aristide

Author’s Note

This article was written nine years ago, in the last days of February 2004 in response to the barrage of disinformation in the mainstream media. It was completed on February 29th, the day of President Jean Bertrand Aristide’s kidnapping and deportation by US Forces.

The armed insurrection which contributed to unseating President Aristide on February 29th 2004 was the result of a carefully staged military-intelligence operation, involving the US, France and Canada. The 2004 coup had set the stage for the installation of US puppet government in Port au Prince, which takes orders directly from Washington.

Michel Chossudovsky, Global Research, February 26, 2013


(Minor editorial corrections were made to the original draft since its publication on February 29th 2004, the title of article predates the actual Coup D’Etat which was in the making at the time of writing)

original article published at http://globalresearch.ca/articles/CHO402D.html

by Michel Chossudovsky

The Rebel paramilitary army crossed the border from the Dominican Republic in early February. It constitutes a well armed, trained and equipped paramilitary unit integrated by former members of Le Front pour l’avancement et le progrès d’Haiti (FRAPH), the  “plain clothes” death squadrons, involved in mass killings of civilians and political assassinations during the CIA sponsored 1991 military coup, which led to the overthrow of the democratically elected government of President Jean Bertrand Aristide

The self-proclaimed Front pour la Libération et la reconstruction nationale (FLRN) (National Liberation and Reconstruction Front) is led by Guy Philippe, a former member of the Haitian Armed Forces and Police Chief. Philippe had been trained during the 1991 coup years by US Special Forces in Ecuador, together with a dozen other Haitian Army officers. (See Juan Gonzalez, New York Daily News, 24 February 2004).

The two other rebel commanders and associates of Guy Philippe, who led the attacks on Gonaives and Cap Haitien are Emmanuel Constant, nicknamed “Toto” and Jodel Chamblain, both of whom are former Tonton Macoute and leaders of FRAPH.

In 1994, Emmanuel Constant led the FRAPH assassination squadron into the village of Raboteau, in what was later identified as “The Raboteau massacre”:

“One of the last of the infamous massacres happened in April 1994 in Raboteau, a seaside slum about 100 miles north of the capital. Raboteau has about 6,000 residents, most fishermen and salt rakers, but it has a reputation as an opposition stronghold where political dissidents often went to hide… On April 18 [1994], 100 soldiers and about 30 paramilitaries arrived in Raboteau for what investigators would later call a “dress rehearsal.” They rousted people from their homes, demanding to know where Amiot “Cubain” Metayer, a well-known Aristide supporter, was hiding. They beat people, inducing a pregnant woman to miscarry, and forced others to drink from open sewers. Soldiers tortured a 65-year-old blind man until he vomited blood. He died the next day.

The soldiers returned before dawn on April 22. They ransacked homes and shot people in the streets, and when the residents fled for the water, other soldiers fired at them from boats they had commandeered. Bodies washed ashore for days; some were never found. The number of victims ranges from two dozen to 30. Hundreds more fled the town, fearing further reprisals.” (St Petersburg Times, Florida, 1 September 2002)

During the military government (1991-1994), FRAPH was (unofficially) under the jurisdiction of the Armed Forces, taking orders from Commander in Chief General Raoul Cedras. According to a 1996 UN Human Rights Commission report, FRAPH had been supported by the CIA.

Under the military dictatorship, the narcotics trade, was protected by the military Junta, which in turn was supported by the CIA. The 1991 coup leaders including the FRAPH paramilitary commanders were on the CIA payroll. (See Paul DeRienzo,   http://globalresearch.ca/articles/RIE402A.html , See also see Jim Lobe, IPS, 11 Oct 1996). Emmanuel Constant alias “Toto” confirmed, in this regard, in a CBS “60 Minutes” in 1995, that the CIA paid him about $700 a month and that he created FRAPH, while on the CIA payroll. (See Miami Herald, 1 August 2001). According to Constant, the FRAPH had been formed “with encouragement and financial backing from the U.S. Defense Intelligence Agency and the CIA.” (Miami New Times, 26 February 2004)

The Civilian “Opposition” 

The so-called “Democratic Convergence” (DC) is a group of some 200 political organizations, led by former Port-au-Prince mayor Evans Paul.  The “Democratic Convergence” (DC) together with “The Group of 184 Civil Society Organizations” (G-184) has formed a so-called “Democratic Platform of Civil Society Organizations and Opposition Political Parties”.

The Group of 184 (G-184), is headed by Andre (Andy) Apaid, a US citizen of Haitian parents, born in the US. (Haiti Progres, http://www.haiti-progres.com/eng11-12.html ) Andy Apaid owns Alpha Industries, one of Haiti’s largest cheap labor export assembly lines established during the Duvalier era. His sweatshop factories produce textile products and assemble electronic products for a number of US firms including Sperry/Unisys, IBM, Remington and Honeywell. Apaid is the largest industrial employer in Haiti with a workforce of some 4000 workers. Wages paid in Andy Apaid’s factories are as low as 68 cents a day. (Miami Times, 26 Feb 2004). The current minimum wage is of the order of $1.50 a day:

“The U.S.-based National Labor Committee, which first revealed the Kathie Lee Gifford sweat shop scandal, reported several years ago that Apaid’s factories in Haiti’s free trade zone often pay below the minimum wage and that his employees are forced to work 78-hour weeks.” (Daily News, New York, 24 Feb 2004)

Apaid was a firm supporter of the 1991 military coup. Both the Convergence démocratique and the G-184 have links to the FLRN (former  FRAPH death squadrons) headed by Guy Philippe. The FLRN is also known to receive funding from the Haitian business community.

In other words, there is no watertight division between the civilian opposition, which claims to be non-violent and the FLRN paramilitary. The FLRN is collaborating with the so-called “Democratic Platform.”

The Role of the National Endowment for Democracy (NED)

In Haiti, this “civil society opposition” is bankrolled by the National Endowment for Democracy which works hand in glove with the CIA. The Democratic Platform is supported by the International Republican Institute (IRI) , which is an arm of the National Endowment for Democracy (NED). Senator John McCain is Chairman of IRI’s Board of Directors. (See Laura Flynn, Pierre Labossière and Robert Roth, Hidden from the Headlines: The U.S. War Against Haiti, California-based Haiti Action Committee (HAC), http://www.haitiprogres.com/eng11-12.html ).

G-184 leader Andy Apaid was in liaison with Secretary of State Colin Powell in the days prior to the kidnapping and deportation of President Aristide by US forces on February 29. His umbrella organization of elite business organizations and religious NGOs, which is also supported by the International Republican Institute (IRI), receives sizeable amounts of money from the European Union.(http://haitisupport.gn.apc.org/184%20EC.htm ).

It is worth recalling that the NED, (which overseas the IRI) although not formally part of the CIA, performs an important intelligence function within the arena of civilian political parties and NGOs. It was created in 1983, when the CIA was being accused of covertly bribing politicians and setting up phony civil society front organizations. According to Allen Weinstein, who was responsible for setting up the NED during the Reagan Administration: “A lot of what we do today was done covertly 25 years ago by the CIA.” (‘Washington Post’, Sept. 21, 1991). 

The NED channels congressional funds to the four institutes: The International Republican Institute (IRI), the National Democratic Institute for International Affairs (NDI), the Center for International Private Enterprise (CIPE), and the American Center for International Labor Solidarity (ACILS). These organizations are said to be “uniquely qualified to provide technical assistance to aspiring democrats worldwide.” See IRI, http://www.iri.org/history.asp )

In other words, there is a division of tasks between the CIA and the NED. While the CIA provides covert support to armed paramilitary rebel groups and death squadrons, the NED and its four constituent organizations finance “civilian”  political parties and non governmental organizations with a view to instating American “democracy” around the World.

The NED constitutes, so to speak, the CIA’s “civilian arm”. CIA-NED interventions in different part of the World are characterized by a consistent pattern, which is applied in numerous countries.

The NED provided funds to  the “civil society” organizations in Venezuela, which initiated an attempted coup against President Hugo Chavez. In Venezuela it was the “Democratic Coordination”, which was the recipient of NED support; in Haiti it is the “Democratic Convergence” and G-184.

Similarly, in former Yugoslavia, the CIA channeled support to the Kosovo Liberation Army (KLA) (since 1995), a paramilitary group involved in terrorist attacks on the Yugoslav police and military. Meanwhile, the NED through the  “Center for International Private Enterprise” (CIPE) was backing the DOS opposition coalition in Serbia and Montenegro. More specifically, NED was financing the G-17, an opposition group of  economists responsible for formulating (in liaison with the IMF) the DOS coalition’s  “free market” reform platform in the 2000 presidential election, which led to the downfall of Slobodan Milosevic.  

The IMF’s Bitter “Economic Medicine”

The IMF and the World Bank are key players in the process of economic and political destabilization. While carried out under the auspices of an intergovernmental body, the IMF reforms tend to support US strategic and foreign policy objectives.

Based on the so-called “Washington consensus”, IMF austerity and restructuring measures through their devastating impacts, often contribute to triggering social and ethnic strife. IMF reforms have often precipitated the downfall of elected governments. In extreme cases of economic and social dislocation, the IMF’s bitter economic medicine has contributed to the destabilization of entire countries, as occurred in Somalia, Rwanda and Yugoslavia. (See Michel Chossudovsky, The globalization of Poverty and the New World Order, Second Edition, 2003, http://globalresearch.ca/globaloutlook/GofP.html )

The IMF program is a consistent instrument of economic dislocation. The IMF’s reforms contribute to reshaping and downsizing State institutions through drastic austerity measures. The latter are implemented alongside other forms of intervention and political interference, including CIA covert activities in support of rebel paramilitary groups and opposition political parties.

Moreover, so-called “Emergency Recovery” and “Post-conflict” reforms are often introduced under IMF guidance, in the wake of a civil war, a regime change or “a national emergency”.

In Haiti, the IMF sponsored  “free market” reforms have been carried out consistently since the Duvalier era. They have been applied in several stages since the first election of president Aristide in 1990. 

The 1991 military coup, which took place 8 months following Jean Bertrand Aristide’s accession to the presidency, was in part intended to reverse the Aristide government’s progressive reforms and reinstate the neoliberal policy agenda of the Duvalier era.

A former World Bank official Mr. Marc Bazin was appointed Prime minister by the Military Junta in June 1992. In fact, it was the US State Department which sought his appointment.

Bazin had a track record of working for the “Washington consensus.”  In 1983, he had been appointed Finance Minister under the Duvalier regime, In fact he had been recommended to the Finance portfolio by the IMF: “President-for-Life Jean-Claude Duvalier had agreed to the appointment of an IMF nominee, former World Bank official Marc Bazin, as Minister of Finance”. (Mining Annual Review, June, 1983). Bazin, who was considered Washington’s “favorite”, later ran against Aristide in the 1990 presidential elections.

Bazin, was called in by the Military Junta in 1992 to form a so-called  “consensus government”. It is worth noting that it was precisely during Bazin’s term in office as Prime Minister that the political massacres and extra judicial killings by the CIA supported FRAPH death squadrons were unleashed, leading to the killing of more than 4000 civilians. Some 300,000 people became internal refugees,  “thousands more fled across the border to the Dominican Republic, and more than 60,000 took to the high seas” (Statement of Dina Paul Parks, Executive Director, National Coalition for Haitian Rights, Committee on Senate Judiciary, US Senate, Washington DC, 1 October 2002). Meanwhile, the CIA had launched a smear campaign representing Aristide as “mentally unstable” (Boston Globe, 21 Sept 1994).

The 1994 US Military Intervention

Following three years of military rule, the US intervened in 1994, sending in 20,000 occupation troops and “peace-keepers” to Haiti. The US military intervention was not intended to restore democracy. Quite the contrary: it was carried out to prevent a popular insurrection against the military Junta and its neoliberal cohorts.

In other words, the US military occupation was implemented to ensure political continuity.

While the members of the military Junta were sent into exile, the return to constitutional government required compliance to IMF diktats, thereby foreclosing the possibility of a progressive “alternative” to the neoliberal agenda. Moreover, US troops remained in the country until 1999. The Haitian armed forces were disbanded and the US State Department hired a mercenary company DynCorp to provide “technical advice” in restructuring the Haitian National Police (HNP).

“DynCorp has always functioned as a cut-out for Pentagon and CIA covert operations.” (See Jeffrey St. Clair and Alexander Cockburn,  Counterpunch, February 27, 2002, http://www.corpwatch.org/issues/PID.jsp?articleid=1988 ) Under DynCorp advice in Haiti, former Tonton Macoute and Haitian military officers involved in the 1991 Coup d’Etat were brought into the HNP. (See Ken Silverstein, Privatizing War, The Nation, July 28, 1997, http://www.mtholyoke.edu/acad/intrel/silver.htm )

In October 1994, Aristide returned from exile and reintegrated the presidency until the end of his mandate in 1996. “Free market” reformers  were brought into his Cabinet. A new wave of deadly macro-economic policies was adopted under a so-called Emergency Economic Recovery Plan (EERP) “that sought to achieve rapid macroeconomic stabilization, restore public administration, and attend to the most pressing needs.” (See IMF Approves Three-Year ESAF Loan for Haiti, Washington, 1996, http://www.imf.org/external/np/sec/pr/1996/pr9653.htm ).

The restoration of Constitutional government had been negotiated behind closed doors with Haiti’s external creditors. Prior to Aristide’s reinstatement as the country’s president, the new government was obliged to clear the country’s debt arrears with its external creditors. In fact the new loans provided by the  World Bank, the  Inter-American Development Bank (IDB), and the IMF were used to meet Haiti’s obligations with international creditors. Fresh money was used to pay back old debt leading to a spiraling external debt.

Broadly coinciding with the military government, Gross Domestic Product (GDP) declined by 30 percent (1992-1994). With a per capita income of $250 per annum, Haiti is the poorest country in the Western hemisphere and among the poorest in the world. (see World Bank, Haiti: The Challenges of Poverty Reduction, Washington, August 1998, http://lnweb18.worldbank.org/External/lac/lac.nsf/0/8479e9126e3537f0852567ea000fa239/$FILE/Haiti1.doc ).

The World Bank estimates unemployment to be of the order of 60 percent. (A 2000 US Congressional Report estimates it to be as high as 80 percent. See US House of Representatives, Criminal Justice, Drug Policy and Human Resources Subcommittee, FDHC Transcripts, 12 April 2000).

In the wake of three years of military rule and economic decline, there was no “Economic Emergency Recovery” as envisaged under the IMF loan agreement. In fact quite the opposite: The IMF imposed  “stabilization” under the “Recovery” program required further budget cuts in  almost non-existent social sector programs.  A civil service reform program was launched, which consisted in reducing the size of the civil service and the firing of “surplus” State employees. The IMF-World Bank package was in part instrumental in the paralysis of public services, leading to the eventual demise of the entire State system. In a country where health and educational services were virtually nonexistent, the IMF had demanded the lay off of “surplus” teachers and health workers with a view to meeting its target for the budget deficit.   

Washington’s foreign policy initiatives were coordinated with the application of the IMF’s deadly economic medicine. The country had been literally pushed to the brink of economic and social disaster.

The Fate of Haitian Agriculture

More than 75 percent of the Haitian population is engaged in agriculture, producing both food crops for the domestic market as well a number of cash crops for export. Already during the Duvalier era, the peasant economy had been undermined. With the adoption of the IMF-World Bank sponsored trade reforms, the agricultural system, which previously produced food for the local market, had been destabilized. With the lifting of trade barriers, the local market was opened up to the dumping of US agricultural surpluses including rice, sugar and corn, leading to the destruction of the entire peasant economy. Gonaives, which used to be Haiti’s rice basket region, with extensive paddy fields had been precipitated into bankruptcy:

. “By the end of the 1990s Haiti’s local rice production had been reduced by half and rice imports from the US accounted for over half of local rice sales. The local farming population was devastated, and the price of rice rose drastically “ ( See Rob Lyon, Haiti-There is no solution under Capitalism! Socialist Appeal, 24 Feb. 2004, http://cleveland.indymedia.org/news/2004/02/9095.php ).

In matter of a few years, Haiti, a small impoverished country in the Caribbean, had become the World’s fourth largest importer of American rice after Japan, Mexico and Canada.

The Second Wave of IMF Reforms

The presidential elections were scheduled for November 23, 2000. The Clinton Administration had put an embargo on development aid to Haiti in 2000. Barely two weeks prior to the elections, the outgoing administration signed a Letter of Intent with the IMF. Perfect timing: the agreement with the IMF virtually foreclosed from the outset any departure from the neoliberal agenda.

The Minister of Finance had sent the amended budget to the Parliament on December 14th. Donor support was conditional upon its rubber stamp approval by the Legislature. While Aristide had promised to increase the minimum wage, embark on school construction and  literacy programs, the hands of the new government were tied. All major decisions regarding the State budget, the management of the public sector, public investment, privatization, trade and monetary policy had already been taken. They were part of the agreement reached with the IMF on November 6, 2000.

In 2003, the IMF imposed the application of a so-called “flexible price system in fuel”, which immediately triggered an inflationary spiral. The currency was devalued. Petroleum prices increased by about 130 percent in January-February 2003, which served to increase popular resentment against the Aristide government, which had supported the implementation of the IMF economic reforms.

The hike in fuel prices contributed to a 40 percent increase in consumer prices (CPI) in 2002-2003 (See Haiti—Letter of Intent, Memorandum of Economic and Financial Policies, and Technical Memorandum of Understanding, Port-au-Prince, Haiti June 10, 2003, http://www.imf.org/external/np/loi/2003/hti/01/index.htm ). In turn, the IMF had demanded, despite the dramatic increase in the cost of living, a freeze on wages as a means to “controlling inflationary pressures.” The IMF had in fact pressured the government to lower public sector salaries (including those paid to teachers and health workers).  The IMF had also demanded the phasing out of the statutory minimum wage of approximately 25 cents an hour. “Labour market flexibility”, meaning wages paid below the statutory minimum wage would, according to the IMF, contribute to attracting foreign investors. The daily minimum wage was $3.00 in 1994, declining to about $1.50- 1.75 (depending on the gourde-dollar exchange rate) in 2004. 

In an utterly twisted logic, Haiti’s abysmally low wages, which have been part of the IMF-World Bank “cheap labor” policy framework since the 1980s, are viewed as a means to improving the standard of living. In other words, sweatshop conditions in the assembly industries (in a totally unregulated labor market) and forced labor conditions in Haiti’s agricultural plantations are considered by the IMF as a key to achieving economic prosperity, because they “attract foreign investment.” 

The country was in the straightjacket of a spiraling external debt. In a bitter irony, the IMF-World Bank sponsored austerity measures in the social sectors were imposed in a country which has 1,2 medical doctors for 10,000 inhabitants and where the large majority of the population is illiterate. State social services, which were virtually nonexistent during the Duvalier period, have collapsed.

The result of IMF ministrations was a further collapse in purchasing power, which had also affected middle income groups. Meanwhile, interest rates had skyrocketed. In the Northern and Eastern parts of the country, the hikes in fuel prices had led to a virtual paralysis of transportation and public services including water and electricity.

While a humanitarian catastrophe is looming, the collapse of the economy spearheaded by the IMF, had served to boost the popularity of the Democratic Platform, which had accused  Aristide of “economic mismanagement.” Needless to say, the leaders of the Democratic Platform including Andy Apaid –who actually owns the sweatshops– are the main protagonists of the low wage economy.

Applying the Kosovo Model

In February 2003, Washington announced the appointment of James Foley as Ambassador to Haiti . Foley had been a State Department spokesman under the Clinton administration during the war on Kosovo. He previously held a position at NATO headquarters in Brussels. Foley had been sent to Port au Prince in advance of the CIA sponsored operation. He was transferred to Port au Prince in September 2003, from a prestige diplomatic position in Geneva, where he was Deputy Head of Mission to the UN European office.

It is worth recalling Ambassador Foley’s involvement in support of the Kosovo Liberation Army (KLA) in 1999.

Amply documented, the Kosovo Liberation Army (KLA) was financed by drug money and supported by the CIA. ( See Michel Chossudovsky, Kosovo Freedom Fighters Financed by Organized Crime, Covert Action Quarterly, 1999, http://www.heise.de/tp/english/inhalt/co/2743/1.html )  

The KLA had been involved in similar targeted political assassinations and killings of civilians, in the months leading up to the 1999 NATO invasion as well as in its aftermath.  Following the NATO led invasion and occupation of Kosovo, the KLA was transformed into the Kosovo Protection Force (KPF) under UN auspices. Rather than being disarmed to prevent the massacres of civilians, a terrorist organization with links to organized crime and the Balkans drug trade, was granted a legitimate political status.

At the time of the Kosovo war, the current ambassador to Haiti James Foley was in charge of State Department briefings, working closely with his NATO counterpart in Brussels, Jamie Shea. Barely two months before the onslaught of the NATO led war on 24 March 1999, James Foley had called for the “transformation” of the KLA into a respectable political organization:

We want to develop a good relationship with them [the KLA] as they transform themselves into a politically-oriented organization,’ ..`[W]e believe that we have a lot of advice and a lot of help that we can provide to them if they become precisely the kind of political actor we would like to see them become… “If we can help them and they want us to help them in that effort of transformation, I think it’s nothing that anybody can argue with..’ (quoted in the New York Times, 2 February 1999)

In the wake of the invasion “a self-proclaimed Kosovar administration was set up composed of the KLA and the Democratic Union Movement (LBD), a coalition of five opposition parties opposed to Rugova’s Democratic League (LDK). In addition to the position of prime minister, the KLA controlled the ministries of finance, public order and defense.” (Michel Chossudovsky, NATO’s War of Aggression against Yugoslavia, 1999, http://www.globalresearch.ca/articles/CHO309C.html )

The US State Department’s position as conveyed in Foley’s statement was that the KLA would “not be allowed to continue as a military force but would have the chance to move forward in their quest for self government under a ‘different context’” meaning the inauguration of a de facto “narco-democracy” under NATO protection. (Ibid).

With regard to the drug trade, Kosovo and Albania occupy a similar position to that of Haiti: they constitute “a hub” in the transit (transshipment) of narcotics from the Golden Crescent, through Iran and Turkey into Western Europe. While supported by the CIA, Germany’s Bundes Nachrichten Dienst (BND) and NATO, the KLA has links to the Albanian Mafia and criminal syndicates involved in the narcotics trade.( See Michel Chossudovsky, Kosovo Freedom Fighters Financed by Organized Crime, Covert Action Quarterly, 1999, http://www.heise.de/tp/english/inhalt/co/2743/1.html )  

Is this the model for Haiti, as formulated in 1999 by the current US Ambassador to Haiti James Foley?

For the CIA and the State Department the FLRN and Guy Philippe are to Haiti what the KLA and Hashim Thaci are to Kosovo.

In other words, Washington’s design is “regime change”: topple the Lavalas administration and install a compliant US puppet regime, integrated by the Democratic Platform and the self-proclaimed Front pour la libération et la reconstruction nationale (FLRN), whose leaders are former FRAPH and Tonton Macoute terrorists. The latter are slated to integrate a “national unity government” alongside the leaders of the Democratic Convergence and The Group of 184 Civil Society Organizations led by Andy Apaid. More specifically, the FLRN led by Guy Philippe is slated to rebuild the Haitian Armed forces, which were disbanded in 1995.

What is at stake is an eventual power sharing arrangement between the various Opposition groups and the CIA supported Rebels, which have links to the cocaine transit trade from Colombia via Haiti to Florida. The protection of this trade has a bearing on the formation of a new “narco-government”, which will serve US interests.

A bogus (symbolic) disarmament of the Rebels may be contemplated under international supervision, as occurred with the KLA in Kosovo in 2000. The “former terrorists” could then be integrated into the civilian police as well as into the task of “rebuilding” the Haitian Armed forces under US supervision.

What this scenario suggests, is that the Duvalier-era terrorist structures have been restored. A program of civilian killings and political assassinations directed against Lavalas supporter is in fact already underway.

In other words, if Washington were really motivated by humanitarian considerations, why then is it supporting and financing the FRAPH death squadrons? Its objective is not to prevent the massacre of civilians. Modeled on previous CIA led operations (e.g. Guatemala, Indonesia, El Salvador), the FLRN death squadrons have been set loose and are involved in targeted political assassinations of Aristide supporters.

The Narcotics Transshipment Trade

While the real economy had been driven into bankruptcy under the brunt of the IMF reforms, the narcotics transshipment trade continues to flourish.  According to the US Drug Enforcement Administration (DEA), Haiti remains “the major drug trans-shipment country for the entire Caribbean region, funneling huge shipments of cocaine from Colombia to the United States.” (See US House of Representatives, Criminal Justice, Drug Policy and Human Resources Subcommittee, FDHC Transcripts, 12 April 2000). 

It is estimated that  Haiti is now responsible for 14 percent of all the cocaine entering the United States, representing billions of dollars of revenue for organized crime and US financial institutions, which launder vast amounts of dirty money. The global trade in narcotics is estimated to be of the order of 500 billion dollars.

Much of this transshipment trade goes directly to Miami, which also constitutes a haven for the recycling of dirty money into bona fide investments, e.g. in real estate and other related activities.

The evidence confirms that the CIA was protecting this trade during the Duvalier era as well as during the military dictatorship (1991-1994). In 1987, Senator John Kerry as Chairman of the Subcommittee on Narcotics, Terrorism and International Operations of the Senate Foreign Affairs Committee was entrusted with a major investigation, which  focused  on the links between the CIA and the drug trade, including the laundering of drug money to finance armed insurgencies. “The  Kerry Report” published in 1989, while centering its attention on the financing of the Nicaraguan Contra, also included a section on Haiti: 

“Kerry had developed detailed information on drug trafficking by Haiti’s military rulers that led to the indictment in Miami in 1988, of Lt. Col. Jean Paul. The indictment was a major embarrassment to the Haitian military, especially since Paul defiantly refused to surrender to U.S. authorities.. In November 1989, Col. Paul was found dead after he consumed a traditional Haitian good will gift—a bowel of pumpkin soup…

The U.S. senate also heard testimony in 1988 that then interior minister, Gen. Williams Regala, and his DEA liaison officer, protected and supervised cocaine shipments. The testimony also charged the then Haitian military commander Gen. Henry Namphy with accepting bribes from Colombian traffickers in return for landing rights in the mid 1980’s.

It was in 1989 that yet another military coup brought Lt. Gen. Prosper Avril to power… According to a witness before Senator John Kerry’s subcommittee, Avril is in fact a major player in Haiti’s role as a transit point in the cocaine trade.” ( Paul DeRienzo, Haiti’s Nightmare: The Cocaine Coup & The CIA Connection, Spring 1994, http://globalresearch.ca/articles/RIE402A.html )

Jack Blum, who was Kerry’s Special Counsel, points to the complicity of US officials in a 1996 statement to the US Senate Select Committee on Intelligence on Drug Trafficking and the Contra War:

“...In Haiti …  intelligence “sources” of ours in the Haitian military had turned their facilities over to the drug cartels. Instead of putting pressure on the rotten leadership of the military, we defended them. We held our noses and looked the other way as they and their criminal friends in the United States distributed cocaine in Miami, Philadelphia and New, York. (http://www.totse.com/en/politics/central_intelligence_agency/ciacont2.html )

Haiti not only remains at the hub of the transshipment cocaine trade, the latter has grown markedly since the 1980s. The current crisis bears a relationship to Haiti’s role in the drug trade. Washington wants a compliant Haitian government which will protect the drug transshipment routes, out of Colombia through Haiti and into Florida.

The inflow of narco-dollars –which remains the major source of the country’s foreign exchange earnings– are used to service Haiti’s spiraling external debt, thereby also serving the interests of the external creditors.

In this regard, the liberalization of the foreign-exchange market imposed by the IMF has provided (despite the authorities pro forma commitment to combating the drug trade) a convenient avenue for the laundering of narco-dollars in the domestic banking system. The inflow of narco-dollars alongside bona fide “remittances” from Haitians living abroad, are deposited in the commercial banking system and exchanged into local currency. The foreign exchange proceeds of these inflows can then be recycled towards the Treasury where they are used to meet debt servicing obligations.

Haiti, however, reaps a very small percentage of the total foreign exchange proceeds of this lucrative contraband. Most of the revenue resulting from the cocaine transshipment trade accrues to criminal intermediaries in the wholesale and retail narcotics trade, to the intelligence agencies which protect the drug trade as well as to the financial and banking institutions where the proceeds of this criminal activity are laundered. 

The narco-dollars are also channeled into “private banking” accounts in numerous offshore banking havens. (These havens are controlled by the large Western banks and financial institutions). Drug money is also invested in a number of financial instruments including hedge funds and stock market transactions. The major Wall Street and European banks and stock brokerage firms launder billions of dollars resulting from the trade in narcotics.

Moreover, the expansion of the dollar denominated money supply by the Federal Reserve System , including the printing of billions of dollars of US dollar notes for the purposes of narco-transactions constitutes profit for the Federal Reserve and its constituent private banking institutions of which the most important is the New York Federal Reserve Bank. See (Jeffrey Steinberg, Dope, Inc. Is $600 Billion and Growing, Executive Intelligence Review, 14 Dec 2001, http://www.larouchepub.com/other/2001/2848dope_money.html

In other words, the Wall Street financial establishment, which plays a behind the scenes role in the formulation of US foreign policy, has a vested interest in retaining the Haiti transshipment trade, while installing a reliable “narco-democracy” in Port-au-Prince, which will effectively protect the transshipment routes.

It should be noted that since the advent of the Euro as a global currency, a significant share of the narcotics trade is now conducted in Euro rather than US dollars. In other words, the Euro and the dollar are competing narco-currencies.

The Latin American cocaine trade –including the transshipment trade through Haiti– is largely conducted in US dollars.  This shift out of dollar denominated narco-transactions, which undermines the hegemony of the US dollar as a global currency, largely pertains to the Middle East, Central Asian and the Southern European drug routes.

Media Manipulation

In the weeks leading up to the Coup d’Etat, the media has largely focused its attention on the pro-Aristide “armed gangs” and “thugs”,  without providing an understanding of the role of the FLRN Rebels.

Deafening silence: not a word was mentioned in official statements and UN resolutions regarding the nature of the FLRN.  This should come as no surprise: the US Ambassador to the UN  (the man who sits on the UN Security Council) John Negroponte.  played a key role in the CIA supported Honduran death squadrons in the 1980s when he was US ambassador to Honduras. (See San Francisco Examiner, 20 Oct 2001  http://www.flora.org/mai/forum/31397 )

The FLRN rebels are extremely well equipped and trained forces. The Haitian people know who they are. They are Tonton Macoute of the Duvalier era and former FRAPH assassins.

The Western media is mute on the issue, blaming the violence on President Aristide. When it acknowledges that the Liberation Army is composed of death squadrons, it fails to examine the broader implications of its statements and that these death squadrons are a creation of the CIA and the Defense Intelligence Agency.

The New York Times has acknowledged that the “non violent” civil society opposition is in fact collaborating with the death squadrons, “accused of killing thousands”, but all this is described as “accidental”. No historical understanding is provided. Who are these death squadron leaders?  All we are told is that they have established an “alliance” with the “non-violent” good guys who belong to the “political opposition”. And it is all for a good and worthy cause, which is to remove the elected president and “restore democracy”: 

“As Haiti’s crisis lurches toward civil war, a tangled web of alliances, some of them accidental, has emerged. It has linked the interests of a political opposition movement that has embraced nonviolence to a group of insurgents that includes a former leader of death squads accused of killing thousands, a former police chief accused of plotting a coup and a ruthless gang once aligned with Mr. Aristide that has now turned against him. Given their varied origins, those arrayed against Mr. Aristide are hardly unified, though they all share an ardent wish to see him removed from power.” (New York Times,  26 Feb 2004)

There is nothing spontaneous or “accidental” in the rebel attacks or in the “alliance” between the leader of the death squadrons Guy Philippe and Andy Apaid, owner of the largest industrial sweatshop in Haiti and leader of the G-184. 

The armed rebellion was part of a carefully planned military-intelligence operation. The Armed Forces of the Dominican Republic had detected guerilla training camps inside the Dominican Republic on the Northeast Haitian-Dominican border. ( El ejército dominicano informó a Aristide sobre los entrenamientos rebeldes en la frontera, El Caribe, 27 Feb. 2004, http://www.elcaribe.com.do/articulo_multimedios.aspx?id=2645&guid=AB38144D39B24C6FBA4213AC40DD3A01&Seccion=64 )

Both the armed rebels and their civilian “non-violent” counterparts were involved in the plot to unseat the president. G-184 leader Andre Apaid was in touch with Colin Powell in the weeks leading up to the overthrow of Aristide;  Guy Philippe and “Toto” Emmanuel Constant have links to the CIA; there are indications that Rebel Commander Guy Philippe and the political leader of the Revolutionary Artibonite Resistance Front Winter Etienne were in liaison with US officials. (See BBC, 27 Feb 2004, http://news.bbc.co.uk/2/hi/americas/3496690.stm ).

While the US had repeatedly stated that it will uphold Constitutional government, the replacement of Aristide by a more compliant individual had always been part of the Bush Administration’s agenda.

On Feb 20, US Ambassador James Foley called in a team of four military experts from the U.S. Southern Command, based in Miami. Officially their mandate was “to assess threats to the embassy and its personnel.” (Seattle Times, 20 Feb 2004). US Special Forces are already in the country. Washington had announced that three US naval vessels “have been put on standby to go to Haiti as a precautionary measure”. The Saipan is equipped with Vertical takeoff Harrier fighters and attack helicopters. The other two vessels are the Oak Hill and Trenton.  Some 2,200 U.S. Marines from the 24th Marine Expeditionary Unit, at Camp Lejeune, N.C. could be deployed to Haiti at short notice, according to Washington.

With the departure of President Aristide, Washington, however, has no intention of disarming its proxy rebel paramilitary army, which is now slated to play a role in the “transition”. In other words, the Bush administration will not act to prevent the occurrence of killings and political assassinations of Lavalas and Aristide supporters in the wake of the president’s kidnapping and deportation.

Needless to say, the Western media has not in the least analyzed the historical background of the Haitian crisis. The role played by the CIA has not been mentioned. The so-called “international community”, which claims to be committed to governance and democracy, has turned a blind eye to the killings of civilians by a US sponsored paramilitary army. The “rebel leaders”, who were commanders in the FRAPH death squadrons in the 1990s, are now being upheld by the US media as bona fide opposition spokesmen. Meanwhile, the legitimacy of the former elected president is questioned because he is said to be responsible for “a worsening economic and social situation.” 

The worsening economic and social situation is largely attributable to the devastating economic reforms imposed by the IMF since the  1980s. The restoration of Constitutional government in 1994 was conditional upon the acceptance of the IMF’s deadly economic therapy, which in turn foreclosed the possibility of a meaningful democracy. High ranking government officials respectively within the Andre Preval and Jean Bertrand Aristide governments were indeed compliant with IMF diktats. Despite this compliance, Aristide had been “blacklisted” and demonized by Washington.  

The Militarization of the Caribbean Basin

Washington seeks to reinstate Haiti as a full-fledged US colony, with all the appearances of a functioning democracy. The objective is to impose a puppet regime in Port-au-Prince and establish a permanent US military presence in Haiti. 

The US Administration ultimately seeks to militarize the Caribbean basin.

The island of Hispaniola is a gateway to the Caribbean basin, strategically located between Cuba to the North West and Venezuela to the South.  The militarization of the island, with the establishment of US military bases, is not only intended to put political pressure on Cuba and Venezuela, it is also geared towards the protection of the multibillion dollar narcotics transshipment trade through Haiti, from production sites in Colombia, Peru and Bolivia.

The militarisation of the Caribbean basin is, in some regards, similar to that imposed by Washington on the Andean Region of South America under “Plan Colombia’, renamed “The Andean Initiative”. The latter constitutes the basis for the militarisation of oil and gas wells, as well as pipeline routes and transportation corridors. It also protects the narcotics trade.

Mehdi’s Morning Memo: The Return Of ‘Calamity Clegg’?

The ten things you need to know on Monday 25 February 2013...

1) THE RETURN OF 'CALAMITY CLEGG'?

Oh dear. So there we were, minding our own business on a Sunday evening, when out comes the deputy prime minister with a pretty startling admission - "indirect and non-specific concerns about Chris Rennard’s conduct reached my office in 2008" - that seem to contradict his earlier denials of having had any knowledge of claims of sexual misconduct against the senior Lib Dem peer. Clegg flew back to the UK from a half-term holiday in Spain with his family to proclaim that he would "not stand by and allow my party to be subject to a show trial of innuendo, half-truths and slurs".

But the Lib Dem leader has turned a controversy over sexual harassment into, basically, a Lib Dem leadership crisis - perhaps the worst of his political career. Speaking on Radio Solent this morning, Clegg said he "feels for" the women who have come forward but said "until last week... no very specific allegations were put to me...now that those general concerns have evolved into specific concerns we can act and we will".

This morning's front pages have gone for Clegg's jugular:

"Revealed: The Damning New Claim Against Nick Clegg" (Telegraph)

"Clegg Says He Knew Of Sex Claims About Peer" (Times)

"Clegg: I Did Know About Sex Claims" (Independent)

"Clegg Admits He Knew About Sex Claims" (Guardian)

"Clegg: I Did Know About Lord Grope" (Daily Mirror)

As is so often the case when it comes to the Lib Dems, the most damning splash is on the front of the Daily Mail:

"Weasel words: Clegg insisted he didn't know about sex allegations against peer. Now he admits he ordered probe FIVE YEARS ago into 'non specific' claims of assaults Now Lib Dems face a police probe."

The paper notes how the Lib Dem leader dumped the current chief secretary to the Treasury right in it: "In a stunning about-face, Mr Clegg said he asked his chief of staff, Danny Alexander, to probe ‘concerns about Chris Rennard’s conduct’ in 2008."

The Telegraph reports:

"Mr Clegg’s predecessors as party leader, Charles Kennedy and Sir Menzies Campbell, could also be asked whether any concerns about Lord Rennard had been raised with them.

"... However party insiders have told The Telegraph that 'at least a dozen women' could have been the subject of the peer's attention."

It ain't looking good for the coalition's junior partner - and this story is going to run and run. "The Lib Dems' attempt last week to insulate Clegg and set up an internal inquiry smacked of a bid to sweep the controversy back under a carpet," writes Kevin Maguire in today's Mirror. "It's been blindingly obvious since the US Watergate scandal that any hint of a cover-up can be more dangerous than the original crime."

Meanwhile, senior Lib Dems are queueing up to plead ignorance. "I knew of no reports that suggested Chris Rennard resigned for anything other than health reasons," the party's deputy leader Simon Hughes said on BBC Breakfast this morning. Pressed on whether he was aware of complaints against Rennard, Vince Cable told the Marr programme yesterday: "Absolutely not."

And it has to be pointed out, of course, that Lord Rennard has strenuously denied all of the allegations made against him.

2) LET'S TRY AGAIN

If you think the Rennard affair is the only scandal harming the Lib Dems right now, think again.

From the Telegraph:

"The retrial begins today of Vicky Pryce, 60, after the jury was discharged for failing to reach a verdict in her trial for perverting the course of justice by taking speeding points for ex–husband Chris Huhne."

3) EYE ON EASTLEIGH

Meanwhile, the Lib Dems remain bullish about their prospects for victory in Eastleigh - the Times quotes a senior pary figure, speaking off the record:

“'If Chris Huhne lying isn’t going to derail us then a peer that very few people have heard of is not going to harm us,' he said.

"Although Mike Thornton, the Lib Dem candidate, remains the favourite to win the election, bookmakers have cut the odds of victory for the Conservatives after a new poll. The poll, conducted by Survation and published yesterday, showed the Tories with a four-point lead. Ladbrokes has slashed the odds of Maria Hutchings, the Conservative candidate, winning the seat from 5-1 to 5-2."

As the Independent's lead editorial notes, "It is difficult to overstate the significance of Thursday's by-election. The contest is still a hard-fought scrap between the Coalition partners with far-reaching implications for Britain's political landscape, up to the 2015 election and beyond." The Sun's Trevor Kavanagh agrees: "Thursday’s battle will seal the fate of either David Cameron or Nick Clegg and even perhaps the Coalition they lead. It could even hasten the General Election, officially fixed for May 2015, with devastating consequences for the Conservatives."

4) 'A DOWNGRADED CHANCELLOR'

The Rennard affair couldn't have come along at a better time for George Osborne. All eyes are on the Lib Dems, rather than the hapless chancellor of the exchequer who lost our economy's triple-A credit rating on Friday night.

Well, not all eyes. The FT splashes on "Osborne feels the heat over rating blow", noting how:

"George Osborne is under pressure from both sides of the coalition to change the government's economic plan after the UK's loss of its triple A credit rating prompted colleagues of the chancellor to question his economic credibility.

"... Tory MPs are becoming increasingly dissatisfied with the chancellor's performance, with the 100-strong "No Turning Back" group of Thatcherite backbenchers spearheading a push for greater austerity to fund tax cuts.

"David Ruffley, a leading member of the group, said: 'Some of us would like him to cut public spending even more in order to fund tax cuts to inject a fiscal stimulus into the UK economy at the budget.'"

Cut spending even more? Really? Insanity, as Einstein is said to have once remarked, is doing the same thing twice and expecting different results.

"George Osborne is a bankrupt Chancellor of the Exchequer," says an irate editorial in the Mirror. "His failure to adopt a Plan B to make the economy grow is the political equivalent of banging his head against a brick wall... As it stands, he is a downgraded Chancellor."

In its lead editorial, however, the Times - home to key Osborne ally, Danny Finkelstein - says "the problem is not that the strategy laid out by the coalition in 2010 was wrong. It is that the Government has failed to implement that strategy with sufficient vigour and political courage".

If. You. Say. So.

5) GAY MARRIAGE REVOLT, PART 68

First we discovered that Dave was having difficulties persuading his mother to back his same-sex marriage bill; now we learn that he's lost the support of the chair of his own local party association. From the Telegraph:

"The chairman of David Cameron’s local Conservative association has resigned in protest at his support for gay marriage.

"Cicely Maunder, 64, has abandoned her party membership and a number of the executive committee in Chipping Norton are said to have joined her.

"The decision by Mrs Maunder will be embarrassing for the Prime Minister who has a home in his Witney Constituency not far from the town in Oxfordshire."

BECAUSE YOU'VE READ THIS FAR...

Watch this video of a kitten inside a... glass. Yes, a glass.

6) 'LISTENING TRIP'

Welcome to Britain, John! From the Times:

"John Kerry, the new US Secretary of State, is expected to focus on the Middle East on his inaugural world tour, which kicked off in London last night.

"Syria will be on the menu at a breakfast meeting with David Cameron this morning, but talks with the Prime Minister and later with William Hague, the Foreign Secretary, are also expected to touch on the Falklands.

Mr Kerry's ten-day tour is billed as a "listening trip" but already it is becoming clear that the new Secretary of State will run up against problems: the reluctance of the Syrian opposition to trust a White House that has vetoed arms deliveries, the limits of diplomacy in persuading Iran to drop its pursuit of a nuclear bomb, and European reluctance to spend more on defence. It will also take up the British call for faster progress on reaching a Middle East peace settlement, with an eye to President Obama's trip to Israel in March.

The paper notes that "Mr Kerry has an edge over his European counterparts because, unlike many of them, he has met President Assad on several occasions".

7) THE LOST WAR

More good news from the 'good war' in Afghanistan - via tonight's BBC Panorama:

"Shocking revelations of murder, sexual abuse of young boys, unarmed civilians being shot at, police officers high on drugs, and routine kidnaps and extortion are exposing the true state of Afghanistan's security forces in Helmand province.

"An investigation has revealed how Afghan forces running bases that British soldiers fought to secure are barely able to function – let alone pose a challenge to the Taliban."

Meanwhile, the Times reports:

"President Karzai yesterday ordered all US Special Forces out of a province bordering Kabul amid allegations that Afghans working with them are involved in murder and torture."

"In a test of his power over the Nato-led mission, the President issued his directive after several months of complaints about US-sponsored militias roaming unchecked in Wardak. They are alleged to have cut a student’s throat and made nine people disappear."

Are you 'listening', Mr Kerry?

8) 'HOW NOT TO RUN AN ELECTION'

That's the title of a new and damning study from the Electoral Reform Society on last November's police and crime commissioner elections - described as a multimillionpound "debacle"

The Guardian reports:

"Nearly 90% of voters in England and Wales have no idea who their police and crime commissioner is despite November's first direct elections, which cost £75m. A study by the Electoral Reform Society (ERS) shows the elections, which recorded the lowest turnout in peacetime history, were poorly delivered and had failed candidates and voters. Voters were left in the dark about who they could vote for, while candidates were kept away by huge deposits, unclear eligibility rules, vast electoral districts and high campaign costs."

9) MOVE TO WALES, SAVE MONEY

Desperate times call for desperate measures. From the Independent's front page:

"Taxpayers could be given a discount for living and working in Wales, as part of attempts to boost the country's underdeveloped economy.

"The British Government spends £18bn more on Wales every year than it gets back in tax - or £6,008 per head of the Welsh population. At present just one in 16 people earn more than £34,000 - the rate at which the higher 40 per cent tax band kicks in.

"Now, The Independent understands, the Treasury is proposing to allow the Welsh Assembly taxation powers that would allow it to vary the rates of tax that apply to people who live and work in Wales."

10) AN OSCAR FOR LINCOLN

Woo-hoo! Daniel Day-Lewis's superb portrayal of President Abraham Lincoln, in the Steven Spielberg biopic of the same name, ensured the British-born star become the first person to win the best actor Oscar for the third time at last night's Academy Awards ceremony in Los Angeles.

The HuffPost UK's full report on last night's Oscars, and full list of winners and runners-up, is here.

My recent New Statesman column on what Obama can learn from Lincoln is here.

PUBLIC OPINION WATCH

From yesterday's Sunday Times/YouGov poll:

Labour 43
Conservatives 32
Lib Dems 11
Ukip 9

That would give Labour a majority of 114.

140 CHARACTERS OR LESS

@iainmartin1 Chris Huhne down and out, Nick Clegg auditioning for part of Richard Nixon. Vince Cable... pondering...

@toryjim So Nick Clegg might have known something but didn't know what that something that he might have known but didn't know was.

@davidschneider Keen to get to truth of Rennard affair, Clegg launches full inquiry supervised by the Vatican.

900 WORDS OR MORE

Gaby Hinsliff, writing in the Guardian, says: "The Lib Dems' handling of harassment claims has so far been shameful. Their inquiries had best follow their brief – and dig."

Stephen Glover, writing in the Daily Mail, says: "Pity the voters who trusted the REAL 'nasty party'".

Romanian prime minister Victor Ponta, writing in the Times, says: "Our people have an improving economy at home. They don’t need to come to Britain."


Got something you want to share? Please send any stories/tips/quotes/pix/plugs/gossip to Mehdi Hasan (mehdi.hasan@huffingtonpost.com) or Ned Simons (ned.simons@huffingtonpost.com). You can also follow us on Twitter: @mehdirhasan, @nedsimons and @huffpostukpol

Osborne Facing Calls For Spending Cuts After Credit Downgrading

George Osborne was facing renewed demands from the Tory rank-and-file for tax and spending cuts tonight after Britain was stripped of its prized AAA credit rating. Ministers and senior party figures rallied round the chancellor in the wake of the deci...

Osborne To Continue With Austerity Programme Despite Credit Rate

George Osborne insisted Britain would not "run away" from its problems and vowed to continue with his tough austerity programme after Moody's downgraded the country's AAA credit rating. In a major blow to George Osborne's economic strategy, the agency...

Bad News For Osborne As Britain Loses Its AAA Rating

Britain has had its cherished credit status downgraded by US agency Moody's. In a major blow to George Osborne's economic strategy, the agency reduced Britain's debt rating from AAA to AA1, forecasting "sluggish" growth over the next few years. Moody'...

Horsemeat Scandal Goes Global As World’s Largest Food Maker Pulls Tainted Pasta From Spain...

First it was Ireland, then the entire UK, then Germany, and gradually it spread to all of Europe (except for France of course, where it was always a delicacy). But it was only once its finally crossed the Alps and made its way to the Swiss factories of Nestle, the world's largest food maker, did the horsemeat scandal truly go global. The FT reports that "the escalating horsemeat scandal has ensnared two of the biggest names in the food industry, Nestlé, the world’s number-one food maker, and JBS, the largest beef producer by sales. Switzerland-based Nestlé on Monday removed pasta meals from shelves in Italy and Spain and suspended deliveries of all processed products containing meat from German supplier, H.J. Schypke, after tests revealed traces of horse DNA above 1 per cent. Nestlé said it had informed the authorities....Nestlé withdrew two chilled pasta products, Buitoni Beef Ravioli and Beef Tortellini from sale in Italy and Spain. Lasagnes à la Bolognaise Gourmandes, a frozen meat product for catering businesses produced in France, will also be withdrawn."

And now we wait as the panic spreads across the Atlantic to the US, where every food purist, who until recently stuffed themselves full of pink slime and still eats bucketfulls of the mysterious "meat" known as KFC, will accuse their retailer of horseplay, and demand that every burger be triple tested at massive bottom line losses to already profit-strapped food producers everywhere (but will certainly help Madison Avenue as horse ads become the latest advertising meme).

From the FT:

“We are also enhancing our existing comprehensive quality assurance programme by adding new tests on beef for horse DNA prior to production in Europe,” said Nestlé, which just last week said products under its labels were not affected.

The European food industry has already been crippled as the horsemeat scandal unfolds:

Nielsen, the consumer research group, said sales of frozen burgers in the week to February 2 fell 40 per cent, and more than two-thirds of British adults said they would be less likely to buy frozen meat products in the future.

Two people who attended the meeting described it as “constructive”. However, the minister was challenged by several people on how quickly the Food Standards Agency and the Department of Environment acted on intelligence it had received on the food supply chain. One retailer also said an attack by David Cameron on the supermarkets on Friday “had not necessarily been helpful”.

The testing, which some supermarkets already carry out, will mean extra costs for retailers at a time of weak consumer confidence.

Suppliers reckon they will end up bearing the brunt of the cost – adding to the pressure on margins which, some say, caused the problem in the first place.

“The people who in the end will suffer are the food manufacturers, because they will be forced to undertake testing. And the people with the power in this relationship on the whole are the food retailers,” said one industry player.

Many believe equine testing is just the tip of the iceberg. “I am sure this will rapidly move on to other species,” said Adam Couch, chief executive of Cranswick, a meat and pastry goods supplier, which has not been implicated in the scandal.

This is good news for KFC, because once the testing spreads to Yum's restaurant chain, half the DNA that is consumed on the premises will be found to have no earthly basis, and thus, well, "you must acquit".

As for those who are still a lap behind the latest newsflow in the race for the horsemeat-free trifecta, the Guardian has conveniently released the definitive guide to the Equine scandal.

Horsemeat scandal: the essential guide

With the Europewide scandal over the contamination of meat products, from beefburgers to lasagne, showing no sign of abating, study the issue in depth and learn all you need to know about how it came to this with our essential guide.

1. Where did the horsemeat scandal begin?

The Food Safety Authority of Ireland tested a range of cheap frozen beefburgers and ready meals from supermarkets last November for the presence of DNA from other species which were undeclared. It found horse DNA in over one-third of the beefburger samples, and pig in 85% of them.

The majority of the beef ready meals also contained pig DNA but not horse. One beefburger sample from Tesco turned out to be 29% horse instead of beef. Until then supermarkets and enforcement bodies had not tested for horse in beef products, because no one expected it to be there.

There are conflicting reports as to whether the agency began its investigation as random surveillance or after having been tipped off. Because the findings were so serious and likely to do huge damage to commercial interests, the FSAI then spent two months retesting before announcing its findings on 15 January.

The Irish and UK supermarket supply chains are highly integrated. FSAI says it alerted the UK Food Standards Agency in November since what was on sale in Ireland would also be on sale in the UK; the FSA told MPs that it only found out in January. No one knows how long the adulteration has gone on.

2. Where did the horse and pig found by the Irish in beef products come from?

The Irish survey identified three factories as the source of beef products that had been contaminated or adulterated: Silvercrest Foods in Ireland, Dalepak in Yorkshire and Liffey Meats in Ireland. Silvercrest and Dalepak are both subsidiaries of ABP Food Group, one of the largest beef processors in Europe.

ABP pointed the finger of blame at its continental suppliers, with the FSAI saying these were in the Netherlands and Spain. It later said the horsemeat had entered its chain through suppliers in Poland. The Polish government checked its horse slaughterhouses and found no irregularities in labelling. Five weeks into the scandal and the links in the Irish chain have still not been fully established.

Huge blocks of frozen meat at a cold store in Northern Ireland, Freeza Foods, which had been quarantined by officials suspicious of its labelling and state of packaging, were found to contain 80% horse. Freeza Foods said the meat blocks had been delivered to its store by meat broker McAdam Foods but that it had rejected them and only continued storing them as a "goodwill" measure for McAdam. McAdam said it in turn had been sold them by a meat trader in Hull, Flexi Foods, which imports from Poland and elsewhere. ABP confirmed it had been supplied materials by McAdam but the two companies have given conflicting accounts of what the deliveries have been.

ABP has also confirmed that it has been supplied with beef by Norwest Foods, based in Cheshire, with operations in Poland and Spain, which is now also part of FSA inquiries.

The first case of horsemeat being found in fresh beef surfaced this week, when Asda withdrew its fresh beef bolognese. Its supplier was the Irish company Greencore, which said it had in turn been supplied the meat by ABP.

3. Why did some products contain so much more horse than others?

Industry sources and food safety officials believe there are different types of adulteration taking place. Where trace levels of DNA of the wrong species, particularly pig, have been found in beef, the most likely explanation is that they have been contaminated either by failure to clean production lines thoroughly enough between different processing, or that the DNA is present in protein additives widely used in the industry to bulk out cheap so-called value or economy ranges. An economy beefburger can legally contain as little as 47% beef.

Manufacturers add other cheap ingredients including water and fat, and use concentrated proteins to bind the water and fat in. They may appear on labels as "seasoning". One of the cheapest sources of these protein additives is pork rind. It is possible that horse hide is now also being used. The widespread adulteration of cheap chicken breast with pig and beef proteins and water has been uncovered in previous scandals. The beef proteins were derived from hydrolysed cattle hides. It is not illegal to use these protein concentrates so long as they are identified correctly to the manufacturer.

Where horse has been found above trace levels, however, experts believe they are looking at fraudulent substitution of horse for beef. Where horse has been found in high concentrations, they say it suggests industrial scale adulteration.

4. How did the rest of Europe get involved?

Once the Irish authorities had reported their findings, the UK FSA asked industry to test all its beef products for horse. The next round of tests revealed that the "beef" in frozen lasagne and spaghetti bolognese made for Tesco, Aldi and Findus by a French manufacturer, Comigel, was up to 100% horse.

Comigel was making cheap beef meals for supermarkets and branded companies in 16 different countries so the scandal spread rapidly, with horsemeat meals being withdrawn in Germany, Sweden, Belgium, the Netherlands, Switzerland, as well as Ireland and the UK.

5. Is the source of the Irish horsemeat the same as the French one?

The trail of the French manufacturing scandal has taken a different route to the Irish/British one so far. Comigel had subcontracted its ready meal production to a factory in Luxembourg, Tavola. It was supplied with meat by a company called Spanghero. Spanghero had bought meat from a Dutch fraudster already convicted of passing horse off as beef, Jan Fasen.

The Dutch trader ran a company called Draap, which spelled backwards is paard or Dutch for horse. It was registered in Cyprus in 2008, with an offshore vehicle in the British Virgin Islands. It emerged during Fasen's trial in Holland that he had supplied French companies with horsemeat imported from South America and Mexico fraudulently labelled as Dutch and German "beef" going back to 2007.

The horsemeat found in the recent tests on ready meals exported from France was said to have been sourced by Draap from Romania. The Romanian government has said its meat was legally exported correctly labelled as horse. The French government said Spanghero was the first agent to stamp the horse as beef; Spanghero has denied doing so deliberately. Fasen says Spanghero and French manufacturers were in on the deception from the beginning.

6. Why are the supply chains so complex?

The food and retail industries have become highly concentrated and globalised in recent decades. A handful of key players dominate the beef processing and supermarket sectors across Europe. They have developed very long supply chains, particularly for their economy lines, which enable them to buy the ingredients for processed foods from wherever they are cheapest at any point, depending on exchange rates and prices on the global commodity markets. Networks of brokers, cold stores operators and subcontracted meat cutting plants have emerged to supply rapidly fluctuating orders "just in time". Management consultants KPMG estimate there are around 450 points at which the integrity of the chain can break down.

7. Why has it happenened?

Supermarket buyers and big brands have been driving down prices, seeking special offers on meat products as consumers cut back on their spending in the face of recession. The squeeze on prices has come at a time when manufacturers' costs have been soaring. Beef prices have been at record highs as has the price of grain needed to feed cattle. The cost of energy, heavily used in industrial processing and to fuel centralised distribution chains, has also soared. There has been a mistmatch between the cost of real beef and what companies are prepared to pay.

8. How is the meat industry regulated?

Licensed slaughterhouses across Europe are required to have an official vet in attendance when slaughtering takes place – in the UK most used to be directly employed by the government but many are now supplied under contract to the Food Standards Agency by the private company Eville & Jones. Plants over a certain size are also required to have a meat hygiene inspector. A trend to deregulate and leave industry to police itself, begun under the last government, has seen numbers of inspectors fall from 1,700 at the height of the BSE crisis to around 800 now. Smaller cutting plants are no longer subject to daily inspection. The Food Standards Agency has limited powers – it has depended on industry alerting it to the results of tests voluntarily. Enforcement largely falls to individual local authorities and their trading standards officers, and their budgets have been slashed.

9. What about industry claims that it has full traceability?

The industry has previously boasted that it has full traceability of its supply chain which it audits frequently. The current scandal shows that that traceability is not worth the paper it is generally written on. Most of the factories caught up in the scandal have accreditation with mainstream auditing schemes such as that run by the British Retail Consortium but it failed to spot the problem.

10. What happened to government control of food safety and standards?

The Food Standards Agency was set up in the wake of the BSE crisis when it became clear that one agency that co-ordinated all regulation on food safety and quality was needed. Political memories have been short, however. The coalition government broke up much of the FSA in its bonfire of the quangos, so that responsibility in the current scandal is split. The FSA is still in charge of food safety; the Department of Health is responsible for nutritional standards, and the Department for Environment, Food and Rural Affairs covers labelling and veterinary medicines.

11. Where do the horses come from?

The Polish and Romanian governments have not only protested their innocence of exporting horse as beef but also pointed out that their horse slaughtering industries are not large enough to account for the scale of adulteration that is emerging. Respected animal welfare organisations have warned governments for several years about the growing trade in knackered horses both between Ireland, the UK, France and Belgium, and between North and South America, and continental Europe. Much of the latter is landed via Belgium. The welfare charities have documented horses in the thousands that have been moved by networks of horse dealers without proper passports. They are a mixture of horses bred for racing and pets.

12. What part do UK horse abattoirs play?

There is an established transport corridor for horses for slaughter from Ireland through Scotland or Wales to England and on to Europe. Last week a horse abattoir in Yorkshire, Peter Boddy, was raided along with a Welsh meat trading company. Three men have been arrested on suspicion of offences under the Fraud Act. The Peter Boddy abattoir, now closed, was small, with official records showing it slaughtered 44 horses last year.

13. Why are governments talking about organised crime?

Previous convictions of dealers and traders along with intelligence suggest a link between the horse trade, meat laundering and various forms of trafficking. Lorries transporting horses have been used as cover for smuggling large quantities of cannabis between the UK and Northern Ireland and lorries transporting horsemeat to the continent are believed to be used for people smuggling on the return journey.

14. Is it a health problem?

The government said at first that there was no health risk from horsemeat, but a leading government public analyst pointed out that it could not be sure until it knew the source of the horsemeat. The latest advice from the chief medical officer is that there is a risk but that it is very low.

Horses are routinely treated with an anti-inflammatory drug called phenylbutazone, or "bute". Bute is banned from the human food chain, because it can in rare cases cause a potentially life threatening illness, aplastic anaemia, or bone marrow failure. Since it is not known what triggers the illness, it has not been possible to set any safe level for bute residues in human food. Doses from horsemeat are likely to be very low. Horse passports are supposed to record any bute administered so that animals can be excluded from going for food, but with large numbers of fake passports in circulation, some horses containing bute have been eaten.

Since the scandal the government has changed the rules so that horse carcasses may now only be released for consumption once they have been tested for bute. The first batch of tests found around 4% of horse testing positive. The horse trade from the Americas has similarly been bedevilled by problems with horse passports and drug contamination.

Your rating: None Average: 5 (4 votes)

The Lamest Excuses Money Can Buy

As we try to grasp the reasoning behind cuts to life-saving programs while billion-dollar incomes and trillion-dollar profits are being made, we must understand that extreme wealth deadens parts of the brain. Empathy and honesty go first. Then rationa...

The Lamest Excuses Money Can Buy

As we try to grasp the reasoning behind cuts to life-saving programs while billion-dollar incomes and trillion-dollar profits are being made, we must understand that extreme wealth deadens parts of the brain. Empathy and honesty go first. Then rationa...

Key Macro Events In The Coming Week

With the world engaged in open currency warfare, the only thing that matters are the assorted drivers that push various global currencies higher and lower. Here are the key macro/FX-related catalysts in the week ahead.

2012 Q4 GDP has been weak in G3 and indeed Europe more broadly, (however it has generally surprised to the upside in Asia), consequently, the momentum of business sentiment will be key to watch. The Euro area flash PMI, German Ifo and the Philadelphia Fed survey are released this week (the China flash PMI will be released on Feb 25). The consensus expects a further small rise in the Euro area services and manufacturing readings. The week also brings a batch of central bank commentary, where the focus will be on references to currency strength; these include the RBA minutes followed by testimony, a speech by RBNZ governor Wheeler, Bank of Thailand policy decision and Bank of England minutes. The Federal Reserve will release the minutes from the last meeting and they may contain important clues on the bias of the Committee with respect to how long it expects the current QE program to last. Additionally, the Committee may have discussed the potential merits of outcome-based guidance for balance sheet policy, which may be reflected in the minutes.

Monday 18 February

  • Singapore Exports (Jan): Exports rose by 0.5%yoy, less than the 3.0%yoy expected by the Bloomberg consensus.
  • Thailand GDP (Q4 2012): GDP grew by 3.6%qoq, higher than the 0.5%qoq expected by the Bloomberg consensus. The very strong year-on-year print of 18.9% is influenced the flood-related weakness of Q4 2011.
  • Euro area current account (Dec): Last reading was a record surplus of EUR14.8bn in seasonally adjusted terms.

Tuesday 19 February

  • Australia: RBA Minutes: The Minutes may give some important context around whether a rate cut was seriously entertained. Even so, the information content in these Minutes is somewhat limited – given that they pre-date the far more detailed annunciation of RBA views presented in last Friday’s quarterly Statement on Monetary Policy.
  • Malaysia current account balance (Q4): The previous reading was MYR9.5bn, or only 4% of GDP. Malaysia's smallest surplus in 10 years.
  • Sweden CPI (Jan): Bloomberg consensus expects a reading of 0%yoy, up from -0.1%yoy previously.

Wednesday 20 February

  • Japan Trade balance (Jan): Another huge trade deficit is expected in January as Abe's export-promotinh policies fail to gain any traction.
  • New Zealand: RBNZ Governor Wheeler speaks: The topic of the speech is reportedly the NZD and it will reiterate that the RBNZ believes the NZD is overvalued and would prefer it to be lower. The main question is what else will be said?
  • Thailand Monetary policy meeting: Rates are expected to remain on hold at 2.75%.
  • Malaysia CPI (Jan): Inflation is expected to remain at 1.2%yoy by Bloomberg consensus.
  • Malaysia GDP (Q4): GDP is expected to expand by 5.5%yoy after 5.2% previously by Bloomberg consensus.
  • Germany CPI (Jan): Bloomberg consensus expects a reading of 1.7%yoy
  • France CPI (Jan): Bloomberg consensus expects a reading of 1.4%yoy
  • UK: Bank of England Minutes
  • US PPI (Jan): (GS +0.1%, consensus +0.4%, last -0.3%); core PPI for January (GS +0.1%, consensus +0.2%, last +0.1%). Pipeline inflationary pressures remain very subdued, with core PPI prices for finished goods rising at a modest 0.9% annual rate over the past three months.
  • US FOMC Minutes: The January FOMC meeting was relatively uneventful, with no policy changes announced. However, the meeting minutes may contain important clues on the bias of the Committee with respect to how long it expects the current QE program to last. Additionally, the Committee may have discussed the potential merits of outcome-based guidance for balance sheet policy, which may be reflected in the minutes.

Thursday 21 February

  • Euro area flash PMIs: The Bloomberg Consensus expects a rise to 48.5 from 47.9 for the manufacturing PMI and to 49.0 from 48.6 for the services reading.
  • US CPI (Jan): GS +0.1%, consensus +0.1%, last 0.0%; core CPI for January GS +0.2%, consensus +0.2%, last +0.1%. Core CPI prices likely rose a soft 0.2% (+0.16% unrounded), consistent with an only modest underlying rate of inflation. Headline prices probably increased a smaller 0.1%, as retail gasoline prices -- an important driver of month-to-month changes in headline inflation -- declined on a seasonally adjusted basis in January. Retail gasoline prices have since risen sharply in February.
  • US Philadelphia Fed: Consensus +1, last -5.8. In light of the solid gain in the ISM manufacturing index in January and the sharp improvement in the February Empire manufacturing survey, consensus expects another bounce.

Friday 21 February

  • Australia: RBA Parliamentary Testimony (Feb): This RBA semi-annual parliamentary testimony comes at a very interesting juncture, and it will be a highly market-sensitive event given that it is the first public presentation by Governor Stevens since 12 December. As is typically the case, the initial prepared remarks should stick to the script published in the recent Statement on Monetary Policy. However, with several hours of subsequent Q&A, there is then plenty of scope for the Governor to provide more colour on the RBA’s forecasts and the related risks, including currency related.
  • German Ifo (Feb): Consensus expects a rise to 104.9 from 104.2.
  • Canada CPI (Jan): Consumer price index (Jan). Consensus: +0.2% MoM, +0.7% YoY. Prior -0.6% (+0.8% YoY). Core consumer price index (Jan), 8:30am. Consensus: +0.2% MoM, +1.1% YoY. Prior: -0.6% (+1.1% YoY).
  • Canada Retail sales (Dec): Retail sales (Dec). Consensus: -0.4%MoM. Prior: +0.2%. Retail sales ex autos (Dec), 8:30am. Consensus: +0.1% MoM. Prior: -0.3%.

Summarizing the above in tabular format courtesy of SocGen:

And the weekly narrative, from the same French bank:

EURO AREA SENTIMENT

Kicking off with the February ZEW survey on Tuesday, this week will see the release of a string of sentiment indicators. We expect the German ZEW, euro area PMIs and German IFO to all post some further improvement on the back of continued easing in financial stress. Euro strength, however, may have been a headwind. Overall we expect improvements this month to be less than the previous month. The French INSEE survey is seen flat, however, after the decline last month reflecting still lacklustre demand.

MARKET ISSUES: Economic data are set to take a backseat to the Italian elections this week. The release of the EU Commission’s new set of economic forecast on 22 February should nonetheless attract some interest. Points of particular interest will be the strength of the forecasted recovery and developments on the cyclically adjusted budget deficits. Note, this will mark the first release in a new forecast schedule of three releases per annum (as opposed to two, with two interim updates).

US HOUSING RECOVERY

Presidents’ Day Monday means a shorter week focusing on housing and inflation data. We expect the NAHB housing sentiment indicator to hit a 7-year high in February and look for the housing data (January housing starts, building permits and existing home sales) to generally be in line with our central scenario of a housing recovery. January CPI is set to post its first monthly gain since October on the back of higher food and non-energy service costs. The February Markit PMI indicators should also point to recovery, forecast at 57 after 55.8 previously. While the risk that QE could ultimately trigger inflation remains a debate in the market, there is clearly no sign hereof in actual inflation data and nor do we see any for the foreseeable future.

MARKET ISSUES: We do not expect the minutes of the 29-30 January FOMC (Wednesday) to give grounds for a shift in monetary policy expectations, but just when the Fed will slow the pace of QE is very much at the heart of the market debate as recovery gains traction.

JAPAN TRADE TO IMPROVE

It is still too early to expect the recent yen decline to show up in hard trade data in a significant way, but January trade data should benefit from a recovery in exports to China. As highlighted above, we see further yen depreciation ahead and this should prove a support for the trade data over time. Importantly, we note that for Japan’s policy stimulus to result in a sustainable recovery, wage gains are ultimately needed, which would erode some of the competitiveness gains that a weaker currency can offer.

MARKET ISSUES: Focus is on the yen, and while we expect to hear less speak on the topic, we expect Japan to pursue the type of policy expansion that will see the yen at USD/JPY 100 by year-end.

Your rating: None

Importance of the G20: Not What You Think

There was something important coming from the G20 meeting, but it is not the currency wars that have captured so many imaginations in the media and blogosphere. It was about corporate taxes, but before turning to it, let's try to put the currency statement in perspective.

As many recognize, the currency market is prone to being used to pursue beggar-thy-neighbor policies of competitive devaluations.  The danger is that it leads to trade wars and then shooting wars.  The rules of engagement, as they have evolved over the last quarter of a century or so, are essentially three-fold.

First, exchange rates are not proper goals of policy.  Economic growth and price stability are the proper goals of policy.  Second, foreign exchange prices are best set by the market in a flexible way to help foster the adjustment process and a reduction of global disequilibrium in terms of trade and capital flows.  Third, while avoiding excess volatility, currency prices ought to reflect underlying economic fundamentals and avoid chronic exchange rate misalignments.   On those rare occasions when action, is needed, it should be coordinated and not unilateral.  

The G20 statement, like the G7 statement earlier in the week, restated these longstanding principles.  That members agree not to target exchange rates for competitive purposes was a pointed reminder to Japanese officials to refrain from talking about bilateral exchange rate targets.  And indeed, over the past couple of weeks, Japanese officials have changed their rhetoric and have not talked about specific dollar-yen rates.  

Rarely in stories about currency wars has China been cited.  Yet, it is an indicated co-conspirator, as it were.  The G20 reference to moving more rapidly toward market determined exchange rates  and the importance of avoiding persistent misalignments was clearly addressed to China, and some other East Asian and Middle East countries. 

The rules of engagement allow and encourage countries to pursue monetary and fiscal policies directed at domestic goals.  For several years Japan has been encouraged to reflate its economy.  That it appears to be doing so is not problem.  No one in the G7 or the G20 have objected to that.  The criticism levied against Japanese officials is when they try to manage the currency, suggesting certain targets, and/or overt attempts by the6 government to undermine what is seen as the independence of the central bank.

It also means that the (unconventional) easing of monetary policy by the Federal Reserve is also not an act of (currency) war.  Leaving aside the occasional comment by Brazil's finance minister and a rare comment by a Chinese official, few in positions of responsibility accuse the US of engaging in a competitive devaluation.  

The referees of the rules of engagement as it were, like the IMF, the G20 and the G7 generally agree that although the risks may be there, the conditions and practices now do not meet the threshold of competitive devaluations, a currency war or trade war.  We expect the rhetoric in the traditional and social media about currency wars will die down in the coming period. 

II 

The focus on currency wars distracts from other and arguably more important issues.  Much of coverage of the G20 statement focused on the foreign exchange market, but has missed what is likely an even more important story.

The G20 have begun a process that could lead to the largest overhaul of international corporate tax practices since the 1920s.  The combination of the fiscal pressures at home and the increased importance of intellectual property (e.g., royalties, licensing fees) and questionable transfer pricing corporate practices has elicited a response.  

The official goal is to develop measures to stop tax arbitrage--the shifting of profits from home countries in order to pay lower taxes elsewhere.  A recent OECD study found multinational companies were increasingly booking profits in different countries from where they were generated in order to avoid taxes.

The role of intangibles, like intellectual property rights, services and brands have grown in importance but are difficult to value.  International royalty and license fee payments paid to different subsidiaries within the same business group have soared.  The growing volume of e-commerce also raises issues of the proper tax jurisdiction that are not handled well by the current tax rules.  

This comes even as OECD government have cut statutory corporate tax rates from an average of 32.6% in 2000 to 25.4% in 2011.  The effective tax rate, which is what corporations actually pay, is often much lower due to assorted deductions and allowances.

Recent reports showing that a number of large well-known global companies, such as Starbucks, Apple, Google, Amazon used complicated inter-company transaction to reduce their tax liabilities has helped spur official action.   The big accounting firms are also being called out for the assistance they provide in helping businesses avoid taxes.  

Essentially, the OECD has called for, and the G20 appears to have signed off on, a new effort to modernize the international tax architecture, which could be ready in the next couple of years.  Three committees have been established and more from them will likely be heard around the July G20 meeting.  

The UK will head up a committee to look at transfer prices and the sales to subsidiaries to shift profits from high to low tax jurisdictions.  It is illegal, for example, to structure a particular transaction for the purpose of skirting the law (it is sometimes referred to as "kiting").  For example, it is unlawful for one to withdraw $5000 twice instead of withdrawing $10,000 once in order to avoid reporting requirements.  Can the same principle apply to businesses? 

Germany will head up a committee that investigates way in which companies have reduced the tax base in the accounting of income and assets.  France and the US will lead the third committee, looking at e-commerce in particular, and the proper tax jurisdictions. 

The Obama Administration has been wrestling with the same issue.  Once we get past the sequester and the continuing resolution (authorizes government spending even without a budget), look for corporate tax reform to become more salient.  The fact that it will come after the other events, gives Obama some leverage with the business community, even when it came to the fiscal cliff.  

It is ironic that Obama, who has been accused of being a socialist, is on record of favoring corporate tax reform that include a cut in the top corporate rate to 28% from 35%.  More important than the loopholes he wants to close to pay for the tax cut, is how overseas earnings should be taxed. 

Currently, the US taxes corporate profits earned abroad only when it is repatriated--brought back to the US.  Last month, the nonpartisan Congressional Research Service reported that US-based companies are increasingly shifting profits to tax havens such as Bermuda and Switzerland.  Senator Sanders (VT) has introduced legislation to end the current tax deferral and force companies to pay taxes on their foreign earnings.  Some studies suggest that the higher levels of cash  US corporations are holding is partly a function of these tax avoidance efforts.

At the end of last year, Obama expressed some sympathy for some form of territorial system, which taxes domestic not foreign income.  It could exempt offshore corporate profits from US taxes, seemingly shifting the stance of the 2012 election campaign.  Currently, France, the Netherlands, Belgium and Hong Kong employ a territorial tax system. 

The currency wars have been over-hyped.  There is less there than meets the eye.  The rules of engagement allow for countries to use monetary and fiscal policy for domestic goals.  It does not sanction foreign exchange targeting.  The real news from the G20 meeting is the formal beginning of a process that could very well lead the largest substantial change in international corporate tax system in almost a century.  

Your rating: None

Mehdi’s Morning Memo: Dog Bites Man, Tory Home Secretary Attacks Judges

The five things you need to know on Sunday 17 February 2013...

1) DOG BITES MAN, TORY HOME SECRETARY ATTACKS JUDGES

Eighteen months after the home secretary, Theresa May, falsely claimed that an illegal immigrant was allowed to stay in the UK because of his pet cat, she's picked up the 'human rights help foreign criminals' baton once again - with a coruscating attack on the judiciary in an article for the Mail on Sunday.

The paper itself reports, on its front page:

"Innocent people will be subjected to rape and violent attacks by foreign thugs because judges have sabotaged a bid by Parliament to deport them, Theresa May warned last night.

"In an unprecedented public attack, the Home Secretary accused judges of tearing up the British constitution by flouting a decision by MPs to stop foreign criminals using the European Convention on Human Rights (ECHR) to avoid being thrown out.

"Using highly emotive language, Mrs May claimed there would be more muggings on Britain’s streets because judges let foreign law-breakers stay here. And she vowed to crush the judges’ revolt by rushing through tough new laws.

"Her onslaught follows a long-running row over foreign criminals and immigration cheats who use the ECHR’s ‘right to a family life’ provision to avoid being booted out."

Speaking on the Andrew Marr show this morning, however, human-rights lawyer and Labour peer Helena Kennedy said it was "absolutely imperative judges are not under the thumb of Home Secretaries." Kennedy dismissed May's article as "a populous bit of politicking", pointing out that the number of contentious cases referred to by the home secretary was "minuscule".

Note: There's only five things, not ten things, you need to know this Sunday morning as I am rushing out of the door to do a debate on the (lack of) big ideas in British politics, on the Sky News Murnaghan show at 11:40am, with 'Red Tory' philosopher Philip Blond and 'Blue Labour' thinker Maurice Glasman.

2) HIDE YOUR RINGS!

There's plenty of tax stories in the Sunday papers this morning, off the back of Ed Miliband's surprise 10p/mansion tax announcement on Thursday.

It looks like the Lib Dems are keen to try and wrestle back the wealth tax agenda from the two Eds - from the Mail on Sunday:

"Families will be forced to pay tax on jewellery and other heirlooms under controversial new plans drawn up by the Liberal Democrats.

"Under the scheme, tax inspectors would get unprecedented new powers to go into homes and value rings, necklaces, paintings, furniture and other family treasures.

"Householders would be forced to pay a new ‘wealth’ levy on the assets – with the threat of fines for those who refused to let snoops value their possessions."

That'll go down well with Tory backbenchers already annoyed by various Lib Dem policy measures and proposals.

Meanwhile, the Sunday Times report on the same story reveals that the Lib Dem business secretary Vince Cable is "said to be privately delighted that Labour has come up with the tax policy as it will put pressure on the Conservatives to give in to Lib Dem demands to adopt it. George Osborne, the chancellor, is said to have been sympathetic although Cameron vetoed it".

3) 'NARROWLY AND EXCLUSIVELY FOCUSED'

Once again, the Observer lays into Michael Gove on its front page:

"Education secretary Michael Gove has been savaged by learned societies, academics and even one of his own advisers for devising a new national history curriculum that is narrowly and exclusively focused on Britain.

"In a letter in the Observer signed by the presidents of the Royal Historical Society, the Historical Association, the higher education group History UK and senior members of the British Academy, Gove is condemned for drawing up the curriculum without substantive consultation with teachers and academics.

"... Stephen Mastin, head of history at a school in Cambridge, who worked alongside historian Simon Schama as an adviser to Gove, said the curriculum bore 'no resemblance' to the drafts he worked on as late as last month... Mastin, who stood for the Tories at the last general election, said: 'Between January and the publication of this document – which no one involved in the consultation process had seen – someone has typed it up and I have no idea who that is. It would be scary if we become the only nation in the western world to not teach anything beyond our shores.'"

The paper's political editor Toby Helm adds:

"Michael Gove's Department for Education has taken steps to stop the Twitter feed @toryeducation – to which his own advisers have contributed – from issuing any more abuse against political opponents, critics and journalists.

"Senior government sources said the department had acted to ensure those contributing to the feed will now put out information in a neutral way and free of its previously abusive tone."

BECAUSE YOU'VE READ THIS FAR...

Watch this funny if slightly terrifying video of goats shouting like human beings.

4) AUSTERITY WATCH, PART 223

There's another schools story on the front of the Independent on Sunday - this time related to George Osborne, not Michael Gove:

"George Osborne is secretly breaking his flagship pledge to protect spending on schools, according to the Government's own analysis, revealed in a document leaked to The Independent on Sunday.

"A confidential paper drawn up by civil servants assessing the Department for Education's finances reveals that the Chancellor's promise in 2010 to increase the front-line schools budget in real terms for four years 'is not, in fact, what is happening'.

"The document says: 'Schools are subject to a real-terms cut in their funding because the rate of inflation is currently higher than forecast at the time of the Spending Review [in November 2010].'"

(On a side note, the chancellor will be pleased, however, with the splash headline on the front of the Observer:
"Osborne in pledge to help world's poor fight tax abuse".)

5) I TOLD YOU SO

It's whistleblower time! The Sunday Times reports:

"Ministers were warned more than 18 months ago that illegal horsemeat was getting into the human food chain.

"John Young, a former manager with the Food Standards Agency (FSA), says he alerted the government to a potential scandal of illicit horsemeat with drug residues in human food but was ignored."

Meanwhile, the Sunday Telegraph splashes on news that "British consumers face paying the price for the horse meat scandal": "Mark Price, the chief executive of Waitrose, says that in return for families knowing food is safe and genuine, it cannot be seen as a “cheap commodity” any longer."

The paper adds: "A European Union directive in 2006 ordered 'light touch' regulation, which led to the FSA cutting the number of meat inspectors."

Whistleblowers ignored. Light tough regulation. Loss of public trust. The horsemeat crisis is starting to sound a lot like the financial crisis - well, without the global recession and trillion-pound bailout.

QUOTE UNQUOTE

"William is very gifted, which gives us another interesting challenge in finding the right sort of education for him - impossible in the state system." - the Tory candidate in the Eastleigh by-election, Maria Hutchings, provoked, in the words of the Observer, "a storm of protest as political opponents and state-educated celebrities, said she had insulted state schools, including two local ones with glowing Ofsted reports".

PUBLIC OPINION WATCH

From the Sunday Times/YouGov poll:

Labour 43
Conservatives 32
Lib Dems 12
Ukip 9

That would give Labour a majority of 114.

From the Independent on Sunday/Sunday Mirror/ComRes Observer fortnightly poll:

Labour 36
Conservatives 31
Ukip 14
Lib Dems 8

That would give Labour a majority of 58.

140 CHARACTERS OR LESS

@paulwaugh Paterson 'completely' refutes claims that he was "asleep at the wheel" re horsemeat. But leaves open possibility Spelman was taking 40 winks

@jameskirkup Owen Paterson tells #murnaghan: "It is absolutely illegal to present a horse for slaughter that has taken drugs." Do horses *take* drugs?

@StewartWood Theresa May declares war on judges to deport foreign criminals, Cameron says we're a "soft touch" for foreigners... Lynton Crosby's arrived.

900 WORDS OR MORE

Andrew Rawnsley, writing in the Observer, says: "Ed Miliband's 10p tax pledge is smart politics but poor policy."

John Rentoul, writing in the Independent on Sunday, says: "Ed Miliband, the candidate from the planet Zog"

Rafael Behr, writing in the Sunday Times, says: "Gordon Brown is dead. Long live Gordon Brown."


Got something you want to share? Please send any stories/tips/quotes/pix/plugs/gossip to Mehdi Hasan (mehdi.hasan@huffingtonpost.com) or Ned Simons (ned.simons@huffingtonpost.com). You can also follow us on Twitter: @mehdirhasan, @nedsimons and @huffpostukpol

REVEALED: Donors Trust is the Secret ATM Machine for Climate Deniers

WASHINGTON - February 15 - A new Greenpeace analysis released today shows that Donors Trust, a shadowy funding vehicle, has laundered $146 million in climate denial funding from 2002 to 2011. Yesterday’s article in the Guardian referenced part of the Greenpeace analysis. Today’s report is now up to date with the latest available funding from 2011. As climate denial funding from traceable Big Oil sources like Exxon and the Koch brothers is declining, the anonymous money funneled through Donors Trust is skyrocketing.

This interesting coincidence is illustrated in the graph from the Greenpeace report:Big Oil funding of climate denial declines... "Anonymous" funding through Donors Trust skyrockets. Interesting.

In addition to today’s Greenpeace analysis, yesterday a Center for Public Integrity report detailed the efforts of Donors Trust to set up conservative media megaphones in state capitals. Today, the Guardian reported that these ideological media outlets have been instrumental in anti-climate fights at the state level. These include state and regional attacks against wind power, solar power, and carbon pollution reduction programs.

The key findings of the Greenpeace analysis on Donors Trust:

  • Donors Trust and its associated organization, Donors Capital Fund, have funded 102 climate-denial organizations since 2002.
  • From 2002 to 2011, Donors Trust and Donors Capital Fund have provided $146 million to climate denial groups.
  • In 2010, a dozen climate denial groups received between 30% to 70% of their funding from Donors Trust, including the Koch-founded Americans for Prosperity, as well as Committee for a Constructive Tomorrow (CFACT)
  • Additional climate denial organizations that have received major funding in recent years by Donors Trust include the Heartland Institute, Competitive Enterprise Institute, Cato Institute and the James Partnership (Cornwall Alliance).

Wait, so what is Donors Trust, exactly? It’s a shadowy funding operation for anti-government extremists and climate deniers. The mission of Donors Trust is to provide ultra-conservative funders a way to support their controversial pet-causes without leaving fingerprints on the grants.

But don’t take our word for it – here’s an excerpt from the Donors Trust FAQ webpage:

Who is behind this untraceable money? It’s impossible to track all of the big-pockets hiding behind Donors Trust. One notable individual is Charles Koch, the secretive oil billionaire who was discovered to have funneled $8 million through Donors Trust from two of his foundations. And that’s only the amount that we can track – we don’t know the full extent of the Koch’s account with Donors Trust.

As posted yesterday on our blog and detailed in another great Guardian article, several climate denial organizations rely on Donors Trust for a large share of their budgets. The Heartland Institute, creator of the famously reviled “Unabomber billboard” and coordinators of the annual Denial-palooza conference, relies heavily on a single anonymous donor that sends money through Donors Trust. According to internal Heartland plans leaked to the public, this Anonymous Donor has been responsible for up to 60% of the organization’s annual revenue, with the majority of fund earmarked to “global warming programs.” Even though the leaked documents prove this money is specific for climate projects, the Donors Trust tax forms only disclose the funding’s purpose as “general operations.”

The deep dependence on Donors Trust by climate deniers goes far beyond the Heartland Institute. Marc Morano’s organization, the Committee for a Constructive Tomorrow, has received between 40% and 46% of its budget through Donors Trust in recent years. Morano was named 2012 “Climate Misinformer of the Year,” often found as a talking head on Fox News or CNN denying that human activity is affecting the climate. In response to the President’s 2013 State of the Union address, Morano published a point by point rebuttal to the section on climate change.

CFACT is among over a dozen organizations that get 30% to 70% of their total budgets from Donors Trust and Donors Capital Fund. Other noteworthy groups include Americans for Prosperity Foundation, the Cornwall Alliance (James Partnership), and the State Policy Network.

Independent campaigning organization that uses non-violent, creative confrontation to expose global environmental problems, and to force solutions that are essential to a green and peaceful future.

Venezuelan President Gives Heating Aid to U.S. Poor

Venezuelan President Gives Heating Aid to U.S. Poor

Email this item Email    Print this item Print    Share this item... Share
Posted on Feb 15, 2013
www_ukberri_net (CC BY 2.0)

Venezuelan President Hugo Chavez.

As many as 400,000 Americans suffering from a 25 percent cut in the government’s home heating assistance program will stay warm this winter thanks to a 100 gallon donation of heating oil each from Venezuelan officials.

The federal Low Income Home Energy Assistance Program will lose $1.2 billion this year, reducing its total budget to $3.47 billion. The Obama administration initially wanted to cut funding to $2.5 billion. In 2011, 8.3 million Americans were helped by the program, though some were left out.

According to the National Energy Assistance Directors’ Association, 90 percent of families participating in the program have at least one “vulnerable” member, defined as elderly, disabled or under 18, Policymic reports. The cost of heating oil has hit a 22-year high at $3.93 a gallon, up 57 cents from last year.

More than 200 U.S. homeless shelters are also slated to receive assistance from the Venezuelan government.

—Posted by Alexander Reed Kelly.

Policymic:

Venezuela’s generosity towards its northern neighbor began in 2005, after Hurricane Katrina had ravaged the Gulf Coast, when Citgo donated $1 million to disaster relief and President Hugo Chavez offered to send food, water, fuel, and other humanitarian assistance.  Chavez was not taken up on his offer by the U.S. administration.  That same year, in response to a call by 12 U.S. Senators for oil companies and oil producing nations to donate heating oil to help ease the pain of high prices caused by hurricanes Katrina and Rita, Venezuela rose to the occasion once again. Despite criticism from the American government, the program has continued each winter since.

Read more

More Below the Ad

Get truth delivered to
your inbox every week.

Previous item: Cost of Financial Crisis Tops $22 Trillion



New and Improved Comments

If you have trouble leaving a comment, review this help page. Still having problems? Let us know. If you find yourself moderated, take a moment to review our comment policy.

Please enable JavaScript to view the comments powered by Disqus.

Fossil Fuels ‘May Prove Worthless’

Fossil Fuels ‘May Prove Worthless’

Email this item Email    Print this item Print    Share this item... Share
Posted on Feb 15, 2013
The Webhamster (CC BY-SA 2.0)

By Alex Kirby, Climate News Network

This story first appeared at Climate News Network.

LONDON—The University of Oxford has begun a programme of research to identify high-carbon sectors and assets that could be devalued or written off if the world takes resolute action to limit emissions of greenhouse gases.

It seeks to help investors to avoid sinking money in potentially useless assets that might ultimately lose their entire value, turning into what are known as “stranded assets”.

Assets become stranded if they are replaced by greener alternatives or new technologies, or are subject to new regulations or resource constraints.

In 2012 the International Energy Agency said the world was on course for average temperature rises of at least 4°C, double the limit agreed by world governments. So, it said, a significant part of the world’s known fossil fuel stores would have to stay in the ground to fulfil international climate commitments and reduce dangerous impacts.

The Potsdam Institute for Climate Impact Research has calculated that to reduce the chance of exceeding 2°C warming to 20%, the global carbon budget for 2000-50 is 886 gigatonnes of CO2. Discounting emissions from the first decade of this century leaves a budget of 565 gigatonnes for the remaining 40 years to mid-century.

However, the known fossil fuel reserves declared by energy and mining companies is equivalent to 2,795 gigatonnes of CO2. If the world wants to keep climate change to below 2°C, then, 80% of those reserves can never be burned: they are in fact valueless.

According to the Carbon Tracker Initiative, “this means that governments and global markets are currently treating as assets reserves equivalent to nearly five times the carbon budget for the next 40 years. The investment consequences of using only 20% of these reserves have not yet been assessed.’’

Safer homes for funds

Asset stranding is currently little understood, but the implications are potentially very significant. It could have a direct effect on millions of small savers too, as many universities and pension funds have big investments in hydrocarbon companies (and see our story on 1 February).

The researchers, from Oxford’s Smith School of Enterprise and the Environment, will try to find out which assets and sectors are most at risk and how to respond to the challenges.

The former MP John Gummer, now Lord Deben, chairs the Committee on Climate Change, an independent group which advises the UK Government. Speaking at the School, he stressed the need for businesses and policy makers to adapt to the new economic landscape.

He said: “Investors continue to deploy hundreds of billions of pounds into polluting and unsustainable sectors. In many cases these investments will not be worth what investors think.

“Climate change, scarcer resources and new disruptive technologies will reduce value and strand assets. If investors better understand the risks of investing in these assets they will be attracted to greener alternatives and see them as better business propositions and safer places for their funds.”

Professor Gordon Clark, director of the Smith School, said: “We are looking at how changes in regulation, pricing, technology, society and climate could be a risk to a range of polluting assets.. Our new programme is creating a critically important space for these issues to be understood and for appropriate responses to be developed.”

The four-year research programme’s first project is to focus on the international supply chain for the agricultural sector, examining methods of transport and production. Later projects will probably include transport, power generation, real estate and a range of commodities.

The researchers aim to create new tools to understand and manage the risks of asset stranding. They will also analyse investor portfolios to learn about risk exposures and will compile case studies of best practice.

The programme is being supported by Aviva Investors, Bunge Ltd, Climate Change Capital Ltd and HSBC Holdings plc, with non-financial partners including the Carbon Tracker Initiative, Trucost and WWF-UK.

Get truth delivered to
your inbox every week.

Previous item: Obama Is Making More Sense Than the Loyal Opposition



New and Improved Comments

If you have trouble leaving a comment, review this help page. Still having problems? Let us know. If you find yourself moderated, take a moment to review our comment policy.

Please enable JavaScript to view the comments powered by Disqus.

Notes from the Brink: The Economy in the Winter of 2013



Workers’ Woes

Workers at a non-union Toyota plant in Kentucky have been offered incentives to retire early in order for management to replace them with new hires at a lower starting wage. The labor cost advantages formerly enjoyed by Toyota—the non-union premium—is no longer available to non-union plants in the auto industry. It seems the wages and benefits long ago won by a more aggressive UAW have retreated to the extent that non-union plants must now secure lower compensation in order to compete!

Since the UAW has conceded starting pay in the unionized industry down to about $14-16 per hour, Toyota seeks to replace older workers making around $26 per hour in their Kentucky plant with new hires at $16 per hour. Thus, the union shops are paradoxically pressuring downward the wages and benefits of non-union employees .

As reported in The Wall Street Journal, industry experts claim that the non-union manufacturers enjoyed a $29 an hour competitive advantage in wages and benefits as recently as 2008. By the end of 2011, they report that non-union labor costs were about equal with General Motors and actually higher than Chrysler!

It is hard to imagine a more demoralizing consequence for the union movement in the US: if only the market, and not a fighting union, is to competitively determine wages and benefits, how does one entice workers to join the union? For the bankrupt UAW leadership, union growth comes only from striking a deal with the employers-- a deal that would promise collaboration and stability at the expense of workers’ pay and benefits.

The decimation of the living standards of US unionized auto workers came with the bailout and subsequent temporary stewardship of the auto industry by a Democratic Party administration. That same administration demanded plant closings and layoffs as a condition of the bailout.

With friends like these, workers are sadly in dire straits.

Clearly, radical changes are in order, changes that cry out for class struggle unionism and independent political action. Without a new direction, US workers will continue the descent towards Depression-era living standards.

Currency Wars 

The 1917 text of Lenin’s Imperialism projected intense struggles between rival capitalist powers. Written during an unprecedented total war between the most economically advanced countries, a war that when settled cost the lives of millions of  people, Lenin’s tract explained the First World War as a contest between empires seeking global advantage for the spoils of capitalist exploitation.

Less than twenty years later, the same empire-building forces were again unleashed to carve the world in a desperate attempt to secure markets and sources of strategic resources. World War Two further confirmed Lenin’s thesis that competing capitalist powers were unable to collaborate and cooperate for some greater, universal good. Instead, competition always begets aggression, national chauvinism, and war.

Many were dismissive of Lenin’s prophecies when witnessing the Cold War expediencies of inter-imperial cooperation against the emerging post-war socialist community. With well over a third of the world’s population in the socialist camp, the imperial rivals found a temporary basis of unity around fears and resistance to the success of socialist revolution. The survival of capitalism tamed the inherent rivalries for that moment.

The demise of that threat with the collapse of Eastern European socialism and the accommodation with capitalism by Asian Communists has unleashed the beast of imperial competition. The global economic crisis only serves to fuel the tensions and expose the rivalries.

I wrote in November of 2008 of the “global crackup”, noting that the US was no longer in a position to impose its will on the rest of the world, unable to slough its problems easily upon others. I drew attention to the logic of capitalist competition that, in the long run, denies any hope of cooperation and common solutions.

Today, that tendency— aggressive imperialist rivalry—has found its expression in a new war, a war waged around the relative value of national currencies.

Rulers understand that in a climate of stagnant or declining world trade, nation-states will draw an advantage from devaluing national currencies; by cheapening money—the medium of exchange— domestic enterprises will be able to offer their products at a more favorable price in international markets.

The US tepid “recovery” from the depths of the crisis has largely been won by hyper-exploitation of a docile work force and the dramatic expansion of exports through the Federal Reserve’s massive devaluation of the dollar via the printing press. The Qualitative Easing programs aim to suppress interest rates and remove the corporate garbage generated by the financial promiscuity of the period before the collapse of 2008. But they also have the not-so-unintended consequence of bolstering the competitiveness of US export manufacturing.

At the same time, US policy makers pointed an accusatory finger at the Peoples’ Republic of China, charging its leaders with currency manipulation. While the charge got little traction from those who closely studied these relationships, it served as a useful diversion from US policies and bolstered rounds of anti-China bashing by do-nothing politicians and labor mis-leaders.

European Union leaders, occupied with the desperate effort to save the Euro, offered little resistance to US currency manipulation.

But with the election of Shinzo Abe in Japan, the currency war was joined. Abe, a right-wing nationalist, exploited the Japanese public’s frustration with years of ineffective governance and economic stagnation to scorn cooperation and offer an aggressive economic program geared towards restoring Japanese competitiveness. Assuming the office of Prime Minister, he launched an aggressive campaign to devalue the Yen. His pressure on the Bank of Japan has already (in less than two months!) produced a drop of 10% in the Yen’s value against the dollar and 15% against the Euro. This means that Japanese products are enjoying a growing competitive advantage in international markets.

International bankers see these moves clearly as the opening salvos in a major escalation of the currency/trade wars. Politicians in countries throughout the world have quietly made similar moves to spur competitiveness, but never with the open audacity shown by Abe.

Perhaps even more disturbing is the unabashed belligerence and arrogant nationalism accompanying these economic moves. The Japanese government has provoked disputes with nearly every Asian Pacific government over barren islands claimed as part of Greater Japan. Imperial aggression is as great a danger today as it was nearly a hundred years ago when Lenin established it as a structural feature of mature capitalism.

A Hushed Mea Culpa       

Capital’s policeman, the International Monetary Fund, has offered a quiet confession of an arcane theoretical mistake of enormous consequence. As the leading cheerleader for decades of the “fiscal responsibility” approach to public programs, the IMF can take dubious credit for the policy of austerity as a general panacea for economic duress. A cursory look at the IMF legacy shows a constant, unrelenting enforcement of balanced budgets and meager public spending. Developing countries seeking IMF loans have felt the lash of austerity as a condition of relief.

A cornerstone of IMF thinking was a little discussed macro-economic assumption of the compounding effects of debt reduction. Where “unschooled” common sense might suggest that removing a dollar of public spending from economic activity would remove at least a dollar from a nation’s gross domestic product, the IMF postulated that it would reduce economic activity by only half of a dollar. That is, the “multiplier” for a reduction of public spending was only .5. The assumption, of course, is the neo-liberal axiom that the dollar spent elsewhere in the private sector MUST always be far more productive, must always be greater than unity and, therefore, must always outweigh the loss of “inefficient” public sector spending.

Unfortunately, the axiom is wrong. IMF empirical studies show that, in fact, the multiplier of public spending reductions ranges between .9 and 1.7. In other words, the negative impact of public spending cuts was underestimated by two to three times! The IMF confessed as much in its October report. Unstated, however, is the negative impact of this “error” on hundreds of thousands, perhaps millions, of people who have lost public benefits to the discipline of IMF imposed “fiscal responsibility”. Even more have suffered from the constraint on economic growth produced by the regimen of austerity.

And yet debt reduction through choking government spending remains a priority of political parties from the far right to the social democratic left.

The Sky is Falling, but not on Everyone yet!  

You would never know it from the Wall Street pundits loudly proclaiming the best January stock market in two years, but the US GDP shrank in the final quarter of 2012 (as it did in the UK, the EU, and even the seemingly bullet-proof German economy).

Generally, negative GDP panics investors and disrupts markets, but we live in special times. To the extent that labor remains quiescent and social movements fail to translate into anti-capitalist uprisings, investors and the capitalist class have made their peace with historically unacceptable unemployment and stagnating, but stable economic growth. It’s the earnings that catch the eye of the investors and the wealthy. And they have been holding up rather well so far.

In fact, they are creating the conditions for another round of risk-taking. Money market funds are flush with cash and seeking greater returns, securitization of debt is on the rise again (securities built on auto loans are greater than at any time since 2005), and banks are again growing their real-estate loan portfolios. Capitalism and the lust for ever greater accumulation never sleep!

Of course it is the very mechanism of accumulation, the search for yield on swelling capital (and the accompanying pressures on profitability), that announces the next round in the crisis.

Zoltan Zigedy
zoltanzigedy@gmail.com




    

   
    

Ed Miliband’s 10p Tax Plan Attacked As ‘PR Wheeze’ By Tory Who Favours Move

Ed Miliband’s dramatic decision to outflank David Cameron on the economy by calling for the 10p rate of income tax to be brought back had been dismissed as a "PR wheeze" by the Conservative MP who has campaigned in favour of the move.

On Thursday the Labour leader said reintroducing the band - controversially scrapped by Gordon Brown - would make society fairer. In a keynote speech, he said the move could be funded by a new "mansion tax" on homes worth more than £2m.

Tory backbenchers, led by Harlow MP Robert Halfon, have been campaigning for the 10p rate to be brought back by George Osborne in next month's Budget.

But writing on The Huffington Post UK, Halfon said Miliband’s surprise announcement was "a half-hearted Damascus conversion" to the cause, suggesting it was made with one eye on the impending Eastleigh by-election.

"Only in 2008, HuffPost readers will remember, the Labour Leader said that abolishing the 10p rate of income tax for the poorest Brits was ‘fairer’, and he voted that way in Parliament," Halfon said.

LIKE HUFFPOST UK POLITICS ON FACEBOOK | FOLLOW US ON TWITTER

"What are voters to make of this? In my view, what the public want to know is this: is this just jam for the Eastleigh by-election or is this a substantive policy pledge?

Robert Halfon: Can We Trust Labour's Surprise 10p Announcement?

"Consider the record of the two main parties: Ed Miliband has whipped his MPs to vote against every single tax-cut for the poorest Brits that the Coalition has delivered; whether this is on council tax, fuel duty, or income tax.

"By contrast, Conservatives in government this April will cut income taxes for 25 million people. Two million will have been taken out of income tax altogether.

"And, the poorest who benefited from the 10p rate under Labour (until they scrapped it in 2008) now pay no income tax at all."

Halfon adds: "Today could have been a real policy announcement from Labour, rather than a PR wheeze written on the back of an envelope. As it stands, Labour’s suggestion would only mean an extra £34 a year for a family."

Labour's tax plan has been dismissed by David Cameron, who said it appeared as though it was not properly "costed".

"We'll discover over the course of the day all sorts of problems and issues with a policy that looks like it's been cobbled together overnight," he said.

Lib Dem Chief Secretary to the Treasury Danny Alexander said: "The two Eds are rather late to the party, wanting to cut taxes for those on low and middle incomes.

"After 13 years in government, the only action Ed Balls took was to raise the amount of tax those on low incomes paid by abolishing the 10p rate. It was the biggest tax mistake they ever made and it has taken them until now to realise their error.

Related on HuffPost:

Ed Miliband Announces Plans To Re-Introduce 10p Tax Rate

Ed Miliband has announced a Labour government would reintroduce the 10p tax rate abolished by his predecessor, Gordon Brown, potentially benefitting 25m basic tax rate payers.

In a much-anticipated speech in Bedford on Thursday morning, the Labour leader said his plan would be funded by a mansion tax on houses worth over £2m.

He said: "Let me tell you about one crucial choice we would make, which is different from this government.

"We would tax houses worth over £2 million. And we would use the money to cut taxes for working people.

"We would put right a mistake made by Gordon Brown and the last Labour government."


Jim Pickard

Okay here is how miliband 10p rate only costs 2bn - only applies to first 1k of income above threshold. So only partial reversal of Gordo.

Despite being introduced by then-chancellor, Brown, in 1999, he then abolished the 10p tax rate it to much outcry eight years later.

As well as trying distancing himself from the sins of the previous Labour government, Miliband is keen for his 'One Nation' Labour Party to be seen as supporting hard-working people on lower incomes.

This is in contrast to a Conservative-led government that, according to the polls, is seen as favouring the wealthy with policies such as the controversial cut to the 50p top rate of tax and a reluctance to implement a tax on higher priced properties.

On Wednesday, at PMQs, David Cameron mocked the Labour leader for planning to give a speech without any policies in it.

Miliband declared: “Moving Labour on from the past and putting Labour where it should always have been, on the side of working people.


Joey Jones
So takes up an emblematic libdem policy and junks an emblematic gordon brown policy. V interesting.

“Britain is at a fork in the road. We can carry on as we are: falling wages, low growth, failure to tackle the deficit.

“Or Britain can take the path I have outlined: a recovery made by the many, tackling low growth and reducing the deficit, building not squeezing the middle, all of us playing our part in turning this economy around.”

In a Q&A session after the speech, shadow chancellor, Ed Balls, outlined how the mansion tax would work, saying he would work with the Lib Dems to ensure it's success.

Balls claimed it could raise over £1.7bn and he would be happy to start talks with the Treasury on Monday and work on plans with chief secretary, Danny Alexander.


Owen Jones

Labour's plan to reintroduce 10p tax - disastrously scrapped by Brown - funded by mansion tax will be very popular. Redistribution is back

Speaking to the BBC Balls said: "This is a very clear statement. It's what we want to do now and it's what we want to do in 2015."

Questions have been raised however in the wake of the speech as to the viability of funding the required cut through a mansion tax alone.


Jim Pickard

Sorry to break this to you all but return of 10p income tax rate would cost about 7bn pounds

Cameron rubbished the proposals on a visit to Eastleigh on Thursday.

He said: "My prediction is that they won't have thought it through or costed it properly and we will discover over the course of the day all sorts of problems and issues with a policy that looks like it has been cobbled together overnight," reports Sky News.

Treasury sources told the BBC the plans lacked "economic credibility".


James Chapman (Mail)
No-one who paid Gordon Brown's 10p tax rate pays any tax at all today http://t.co/GjrrmzfM

The government will have a chance to respond when chancellor George Osborne announces the Budget on March 20th.

Also in his speech Miliband stressed it was up to individuals to play their part in a successful British economy and to increase their own living standards.

He said: "When you play your part, when you make your contribution to the economy, you will be rewarded.

"And that Britain’s economic success will be built by the many, not just by a few at the top."

The Labour leader also highlighted the importance of skills training for young people who don't go to university and outlined a new vocational qualification.


Jonathan Freedland

As for Cam's "no policy" jibe, one Lab source says "Cameron yesterday was v helpful for expectations management! It set us up nicely."

He said: "We must end the culture which says University is always best and vocational education is second-best.

"It simply isn’t true.

"That’s why One Nation Labour will create a new technical baccalaureate, to complement A-levels."


Tim Montgomerie

Can't strategically disagree with Ed Miliband's speech. We should be increasing tax on high value properties and cutting income tax (1/2)

Other Labour proposals covered in the speech are to:

  • Break the stranglehold of the big six energy suppliers.
  • Stop the train company price rip-offs on the most popular routes.
  • Introduce new rules to stop unfair bank charges.
  • And cap interest on payday loans.


Joe Murphy
Something borrowed (Vince's Mansion Tax), Something blue (Halfon's 10p restoration) - Ed Miliband grabs both http://t.co/s7rogzdE

Miliband contrasted today's economic climate to that of 1957 when Conservative prime minister Harold Macmillan gave a speech just across the river celebrating a booming British economy, in a speech that became known as the “you’ve never had it so good” speech.

He said: "It’s what Harold MacMillan understood when he spoke here in Bedford more than half a century ago.

"We can rebuild this country, we can offer people hope.

"We can make an economy that works for working people.

"It’s a goal worth fighting for.

"It’s what One Nation Labour will do."

Ed Miliband's speech text network visualised

Mehdi’s Morning Memo: The Living Standards Election

The ten things you need to know on Thursday 14 February 2013...

1) THE LIVING STANDARDS ELECTION

Ed Miliband is going to do his best impression of Ronald Reagan in a 'major speech' (is there ever a minor speech?) on the economy in Bedford today. It's all about living standards, it seems.

The Labour leader has been speaking to - who else? - the Guardian ahead of his address:

"Ed Miliband promises to make the 2015 general election a 'living standards election' as he claims that the coalition's squeeze on middle-income Britain has deepened the recession and created the "chilling prospect" of a further decade of pressure on most families' living standards.

"... Bidding to set the frame for the next election, and drawing on some of the strategy that helped re-elect Barack Obama, the Labour leader says: 'I am offering a choice between an economic recovery made by the many, not just a few at the top, and a Conservative strategy that consists of trickle-down from the top, a squeeze on the middle and a race to the bottom.'

"He goes on: 'I will be asking the question 'are you better off than you were four years ago?' and I don't think it is in dispute – people are worse off. The Office for Budget Responsibility figures are showing earnings behind inflation, and the Institute for Fiscal Studies shows the same. It would be a good start if David Cameron could just admit the facts.'"

Miliband will be speaking in Bedford - where the 'One Nation' prime minister Harold Macmillan, of course, declared that "You've never had it so good" in 1957.

Meanwhile, the Labour leader's shrewdest adviser and close ally (Lord) Stewart Wood, in an exclusive piece for the Huffington Post UK, sets out the context and thinking behind Miliband's speech. He writes:

"In 2013, the problem of the Middle has become the central economic challenge facing our country. It is at the heart of our growth crisis as well as our living standards crisis."

Wood adds that "our economy is too dependent on a low-skill, low-wage model of competitiveness. One measure of this is the UK’s historic (and continuing) deficit in skills" and says that the Tory idea "that the key to our economic turnaround is further deregulation of one of the most deregulated economies in the advanced industrial world is somewhere between dubious and ridiculous."

The shadow cabinet minister also claims that Labour has begun to "flesh out" new policies on the economy over the past two years.

I guess we'll have to wait till later this morning to see what policies, if any, Miliband unveils in Bedford. Either way, the Labour leader is right to focus on (falling) living standards. I mean, it worked for the Gipper, right?

2) BREAKING: BLAIRITE REJECTS BLAIRISM

It isn't just Ed Miliband giving a big speech today. Hats off to shadow defence secretary and arch-Blairite Jim Murphy for being willing to make some painful concessions about Blair's failures on foreign and defence policy - from the Independent:

"A new approach to intervening in foreign countries will be set out by Labour today as the shadow Defence Secretary, Jim Murphy, accuses David Cameron of failing to learn the lessons from Tony Blair's mistakes in Iraq and Afghanistan.

"Ten years after the Iraq War, Labour will attempt to further distance itself from a conflict which alienated many voters by warning against the 'ideological' crusade against al-Qa'ida favoured by Mr Blair and Mr Cameron."

Murphy will also admit that "an almost primitive understanding of the Afghan population, culture and geography prior to Nato intervention severely undermined international attempts to work with proxies and our political strategy was in its conception insufficiently representative. In Iraq there was a serious deficit in Western comprehension of the Sunni-Shia or intra-Shia dynamics."

Hear, hear!

3) BLAST FROM THE PAST

And it isn't just Labour figures who are giving 'big' speeches today, either. Former Conservative prime minister Sir John Major plans to dole out some advice for his party in a speech on Europe at Chatham House later today.

Sir John will welcome his successor but two's promise of an in/out referendum on the EU, saying it's a "gamble" but one that Cameron can't avoid and which could remove "the poison" of Europe from British - and, specifically, Tory - politics.

In a nice phrase, the ex-PM will also warn the current PM to beware of MPs with "with Tory heads and UK independence hearts looking to leave the EU".

He'll also warn eurosceptic Conservative MPs to stop bombarding their leader with demands on the EU and making him look like he's under duress and behaving in the interests of his party, rather than the country.

In an interview with me a few months ago, backbench MP Nadine Dorries said the current political climate reminded her of the early 1990s, with all the instability at the top of government and the attacks on Major over Europe from eurosceptics. I guess we now know that Major himself kinda agrees with her.

4) WHO KNEW WHAT AND WHEN?

Worried about the row over horsemeat? Perhaps you should be - whether you're a member of the public or a member of the government. From the Times splash:

"The Government knew last summer that a sudden ban on cheap British beef and lamb meant it was 'inevitable' that unlawful meat would be imported from Europe.

"MPs will demand today that the food watchdog is given powers to order supermarkets to carry out safety tests after it failed to identify the use of horsemeat in ready meals for up to a year, despite a warning from a government minister last June.

"The Times can also reveal that tests at British abattoirs in the past two weeks have confirmed that eight out of 200 horses slaughtered were contaminated with the veterinary drug phenylbutazone (“bute”), which is banned from food."

5) EYE ON EASTLEIGH

Satirist, comedian and new Labour candidate in Eastleigh, John O'Farrell, comes under some scrutiny in today's papers - from the Daily Telegraph:

"Labour's candidate for the Eastleigh by–election once backed the idea of voting for the Liberal Democrats to keep out the Conservatives in a marginal seat – just like the one he is now contesting.

"... it has emerged that [O'Farrell] once advised his brother to vote Lib Dem in Richmond to keep out the Tories in 1997."

Whoops!

BECAUSE YOU'VE READ THIS FAR...

Planning to propose to your beloved on this Valentine's Day? Check out this video of 22 crazy and amusing wedding proposals...

6) ARE YOU LISTENING, MR PRESIDENT?

Whatever you think of Barack Obama, it is difficult to dispute that the US president has been a disaster for civil liberties. Remember, for instance, how he promised to shut down Gitmo? Well, he'll be reminded of his failure - and the human cost of it - later today. From the Huffington Post UK:

"A 20,000-strong petition will be presented to US President Barack Obama to urge the release of a British detainee at Guantanamo Bay who has been held at the camp for exactly 11 years.

"Shaker Aamer, 44, was taken to the notorious US detention centre on 14 February 2002 under suspicion of recruiting and financing terror group al Qaida.

"Aamer has never been charged or tried with an offence and remains detained despite the US authorities officially approving him for transfer in 2009."

(via Huffington Post UK)

7) DELHI DAVE

From the FT:

"The prime minister will take a delegation of British business leaders to Mumbai and New Delhi to exploit what he called "a special relationship" between the two countries, despite trade links having been strained."

Two points worth mentioning here: 1) Dave will be under pressure to explain to Indian authorities and the country's media why his government seems to be openly discriminating against university students from the subcontinent who want to study in the UK, and 2) it's a rather lopsided special relationship, given it's Cameron's second visit to India since becoming prime minister while his Indian counterpart, Manmohan Singh, has not reciprocated with a visit to London and shows no signs of planning to do so.

8) NEED HELP?

From the Times:

"A mental health clinic is to be set up for MPs at Westminster to help the rising number of politicians who admit that they suffer depression and anxiety.

"Specialist treatment will be offered after officials approved funding of £25,000 a year. On Monday Parliament gave final approval to the Mental Health (Discrimination) Bill, scrapping the law that says that MPs lose their seats if they have been sectioned for more than six months, as well as a rule allowing company directors to be removed because of mental illness."

9) UNGAGGED

The BBC's Today programme has this exclusive:

"A health service manager claims he was gagged by the NHS from speaking out about his dismissal and his concerns over patient safety.

"Gary Walker said he had no choice but to sign an agreement linked to a confidentiality clause in April 2011.

"He said it was a case of either signing the so-called 'super gag' agreement or losing his house.

"... It comes a week after Robert Francis QC, who led the public inquiry into the Stafford hospital scandal, demanded that such agreements should be 'banned'."

10) IT'S ALL IN THE MIND

Are all those speeches, debates, arguments, pamphlets, columns and manifestos a waste of time? Scientists now say that brain scans provide a better clue to our political allegiances than the party loyalties of our parents.

From the Daily Telegraph:

"Liberals and conservatives use different parts of their brain when they respond to risk, according to a team of British and American scientists. They were able to predict if people voted Democrat or Republican with 83 per cent accuracy just by studying their brain activity.

"Volunteers from the parties were asked to play a gambling game while their brains were scanned. Republicans and Democrats were no different in terms of the risks they took during the game, but there was a marked contrast in the way their brains dealt with risk–taking. Democrats showed significantly greater activity in the left insula, a brain region associated with social and self–awareness. Republicans had a more active right amygdala, a region involved in defensive "fight–or–flight" responses.

According to the study, brain activity in these two regions alone was enough to predict with pretty astonishing accuracy whether the participant was a Democrat or Republican.

PUBLIC OPINION WATCH

From the latest Sun/YouGov poll:

Labour 42
Conservatives 32
Lib Dems 9
Ukip 9

That would give Labour a majority of 114.

140 CHARACTERS OR LESS

@damiangreenmp How modern media works. Keith Vaz demands to know why I am not in Commons. I get abuse on Twitter. Reason? My wife in hospital. Happy now?

‏@BorisWatch All sympathy to @damiangreenmp but some reflection on where this view that 'if you're not working you're shirking' came from might help?

@ChrisBryantMP Cracking qu by anas sarwar: when the pm's answers are analysed will they be found to be 100% bull?

900 WORDS OR MORE

Peter Oborne, writing in the Telegraph, says: "Nick Clegg and his poor Lib Dems are having a nervous breakdown."

John O'Farrell, writing in the Guardian, explains: "Why I'm standing for Labour in the Eastleigh byelection."

Leo McKinstry, writing in the Daily Mail, says: "What's the point of a food safety quango that couldn't save us from eating stallion burgers?"


Got something you want to share? Please send any stories/tips/quotes/pix/plugs/gossip to Mehdi Hasan (mehdi.hasan@huffingtonpost.com) or Ned Simons (ned.simons@huffingtonpost.com). You can also follow us on Twitter: @mehdirhasan, @nedsimons and @huffpostukpol

Ed Miliband Under Pressure On The Economy

Ed Miliband will use a major speech on Thursday to attempt to regain lost ground on the economy and set out his vision of how the nation's finances should be run.

Living standards will be at the centrepiece of his message and, in an interview in the Guardian ahead of his speech, the Labour leader says he is "offering a choice between an economic recovery made by the many, not just a few at the top, and a Conservative strategy that consists of trickle-down from the top, a squeeze on the middle and a race to the bottom."

Channeling Ronald Reagan, he adds: "I will be asking the question 'are you better off than you were four years ago?' and I don't think it is in dispute – people are worse off. The Office for Budget Responsibility figures are showing earnings behind inflation, and the Institute for Fiscal Studies shows the same. It would be a good start if David Cameron could just admit the facts."

In a deliberate dig at the Tories, Miliband will make his speech in Bedford, where 'One Nation' Conservative prime minister Harold Macmillan famously declared, in 1957: "You've never had it so good."

However, the latest polls suggest the public is still more likely to trust the Tories to handle the economy and the leader of the opposition has been warned by his party's own policy chief, MP Jon Cruddas, that 'simply opposing the cuts without an alternative is no good.'

On Wednesday, at PMQs, Miliband was mocked by Prime Minister David Cameron, who claimed publicity for the speech said it would contain 'no new policies', after the Labour leader had attacked Cameron on the key issue of living standards, demanding to know whether people would be better off at the 2015 general election than they were in 2010.

In an exclusive article for The Huffington Post UK, to accompany the Labour leader's speech, one of the key figures in Miliband's inner circle sets out "the battle for the middle".

Writing for HuffPost UK, (Lord) Stewart Wood, a shadow cabinet minister and one of Miliband's most senior advisers, says the plight of people on middle incomes - previously labelled the 'squeezed middle' by Labour - is "the central economic challenge facing our country."

In an article that helps contextualise Miliband's approach to the economy, Wood says the UK is "too dependent on a low-skill, low-wage model of competitiveness," and castigates Cameron's 'global race' mantra. "The [Tory] idea that the key to our economic turnaround is further deregulation of one of the most deregulated economies in the advanced industrial world is somewhere between dubious and ridiculous."

For Wood, "strengthening the high-skill/high-wage parts of our economy, and thereby boosting productivity-per-worker of those in the Middle, is essential to altering the relative shares of national income that go to the top and the rest of Britain’s workforce."

The shadow cabinet minister insists that Labour has "begun to flesh out" its approach, pointing to pledges to tackle the power of banks, pension and utility companies. He hints at future support for the 'Living Wage' and "new methods of setting pay in the workplace".

Gideon Skinner, head of political research of the pollster Ipsos Mori, told The Huffington Post UK that living standards formed "an important part" of the debate on the economy. The overall economic outlook is overwhelmingly ranked at the top of voters' concerns, he said, underlining how important it is for both parties to get their tactics right.

Skinner said the Conservatives and Labour had exchanged the lead in recent polls, suggesting it is still up for grabs in 2015.

"No party is particularly owning the economy issue," he added.

Prime Minister’s Questions Dominated By Debate On Living Standards

Labour is banking on the nation's falling living standards to help decide the outcome of the 2015 General Election. Opposition leader Ed Miliband said people feeling worse off than in 2010 would be "the issue of the next two years", attempting to pin ...

Millions Of Families Face A Decade Of Economic Hardship

Millions of families might not see see a return to pre-recession standards of living for another decade, a think-tank warned today.

The Resolution Foundation said many low to middle income households would never fully recover the ground they lost due to the prolonged economic downturn.

Even if typical earnings for such families were to rise by 1.1% a year, the report calculated that would take until 2023 before they recovered to £22,000 a year at current prices - the equivalent of where they stood in real terms in 2008.

Without the prolonged downturn, the report estimates that typical earnings could now be expected to stand at £27,500 a year.

However to reach that level over the next decade would require real terms growth of 3.3%-a-year - figure the report described as "unattainable" based on current forecasts and past experience.

The report defines low and middle income households as being of working age and relying primarily on their own earned resources but with incomes below the median for the UK.

In practice, it means couples without children living on a joint income of between £12,000 and £30,000 or between £17,000 and £41,000 for a couple with two children.

On average this group has seen a 2.4% cut in real incomes since 2009-10, and the report calculated that it would now take 22 years for such households to save for an average deposit on a first time buyer property.

At the same time, polling conducted by Ipsos Mori for the report found many people remained pessimistic about the outlook for the economy.

More than one in three - 36% - did not believe the economy would be growing again by 2015, compared to 47% who thought it would.

Views were divided on whether people expect to be better off by 2015 than they are now - with 42% saying they thought they would against 40% who thought they would not.

The report's author, Matthew Whittaker, said: "There is a long road to travel just to get back to where living standards stood before the crisis - and the prospects of actually recovering the ground lost over recent years appear vanishingly thin.

"Every extra month of falling household incomes is harder to take than the last as household budgets get closer to the edge."

Ipsos Mori interviewed 1,005 British adults aged 18 and over by telephone between February 1 and 3.

Mehdi’s Morning Memo: The Horsemeat Summit

The ten things you need to know on Wednesday 13 February...

1) THE HORSEMEAT SUMMIT

"Now it's British horsemeat in burgers," screams the Daily Mail on its front page. The paper says:

"Meat from British horses was discovered in takeaway burgers and kebabs yesterday.

"The shocking find, which implicates the UK for the first time in the food fraud scandal, came during police raids in Yorkshire and West Wales.

"Environment Secretary Owen Paterson described the development as ‘utterly and totally disgraceful’ but pulled out of making an emergency statement to the House of Commons."

His opposite number, Labour's Mary Creagh said she wouldn't be buying mince of any kind for the moment: "Let's just say that I'm not very keen on mince at the moment, I think I know a bit too much now."

And you know you're in the middle of a crisis when our rulers start having 'summits'.

The BBC reports that "Environment Secretary Owen Paterson will travel to Brussels on Wednesday for a meeting of European countries linked to the horsemeat scandal.

"Ministers from the Irish Republic, France, Romania, Luxembourg, Sweden and Poland will attend."

I can't wait for the official picture of the French and Romanian ministers shaking hands...

2) NO POUND OF FLESH

From the Huffington Post:

"University graduate Cait Reilly has won her Court of Appeal claim that requiring her to work for free at a Poundland discount store was unlawful.

"Three judges in London ruled that the regulations under which most of the Government's back-to-work schemes were created are unlawful and quashed them. The Department for Work and Pensions has not been given leave to appeal, but has said that, regardless, it will appeal to the Supreme Court."

The papers are divided on straight left-right grounds - the Telegraph leader says: "Workfare can still do the job for Britain." The Guardian, however, pens an editorial "in praise of... Cait Reilly", noting: "[T]he point is that Whitehall had assumed a free hand in foisting arbitrary, harsh conditions on unemployed people. Cait Reilly has caught it out – for failing to play by the rules."

Writing in today's Sun, 'compassionate Conservative' Iain Duncan Smith, the work and pensions secretary, is defiant: "Let me be very clear — our back to work schemes are successful and are not slave labour." He adds: "I disagree with the part of the ruling that found against our regulations and we will appeal against that, but crucially the court did not find that anyone's humans rights have been breached because we asked them to do a work placement in return for Jobseeker's Allowance."

3) 'OUR GENERATION'S TASK'

The issue of in-work poverty isn't just a big issue in the UK - last night, President Obama decided to tackle the issue head-on during his State of the Union speech:

From the Huffington Post:

"President Barack Obama on Tuesday night laid out a vision for a society in which everyone has a fair shot at a decent education, adequate health care and a job that pays a living wage.

"'It is our generation's task, then, to reignite the true engine of America’s economic growth -- a rising, thriving middle class,' said the president in the first State of the Union address of his second term. 'It is our unfinished task to restore the basic bargain that built this country -- the idea that if you work hard and meet your responsibilities, you can get ahead, no matter where you come from, no matter what you look like, or who you love.'

"The president's most notable proposal was to raise the minimum wage from its current $7.25 an hour to $9 an hour."

Will George Osborne follow Obama's lead in the Budget next month? Two stats are always worth remembering: 1) the majority of the children living in poverty in Britain live in working, not workless, households, and 2) the UK's minimum wage is now worth less in real terms than it did in 2004.

4) WATERBOTTLEGATE

Obama may have been giving the SOTU speech, but all eyes were on the Republican 'rebuttal' - my US colleague Jon Ward reports on the speech from 41-year-old Florida senator Marco Rubio, who is one of the favourites for the 2016 GOP presidential nomination:

"In his remarks, Rubio hit two things hard: stereotypes of conservatives, and the president. He came out against the former stronger than the latter, devoting an entire passage to rebutting the charge that Republicans want to protect the rich from higher taxes, and another to making clear his devotion to Medicare, in an attempt to stake out a politically viable position on entitlement reform."

Amusingly, Ward adds:

"The media-savvy Republican got favorable reviews, but his night was almost derailed by a bottle of water. When Rubio came to the 10-minute mark in his 14-minute speech, he paused, looked down and to his left, and then looked back at the camera as he bent and reached for a small Poland Spring bottle. For a few brief, excruciating seconds, Rubio took a sip of the water as he looked directly into the camera, and then put it quickly down and resumed speaking.

"Twitter exploded. Video of the moment was quickly posted, Democratic operatives cackled, and journalists complained about the volume of chatter about Rubio's thirst."

5) LEGISLATING FOR LEVESON

David Cameron's plans for a Royal Charter to regulate the press may be nowhere near as tough as the system recommended by Lord Justice Leveson but, according to a story on the front of today's Independent, a 'compromise' deal is close:

"Parts of David Cameron's blueprint to regulate the press could breach European law, the newspaper industry warned yesterday, as his plan to implement the Leveson Report was attacked from all sides.

"But despite criticism from Labour and the Liberal Democrats, some sources suggested the compromise was still possible with all-party talks due to begin tomorrow."

BECAUSE YOU'VE READ THIS FAR...

Off the back of Obama's State of the Union last night, why not re-watch this classic video of the US president slow-jamming the news on Jimmy Fallon's late-night show from April 2012?

6) EYE ON EASTLEIGH

From the Guardian:

"As the author of a seminal account of an activist's life during Labour's 'wilderness years', and later as a writer of jokes for Tony Blair and Gordon Brown, John O'Farrell has been cheering up the party's rank-and file for decades as the self-deprecating chronicler of middle class, left-wing angst.

"But after local members in Eastleigh last night selected him to be the party's candidate in the upcoming byelection, the comedy writer was settling down for the challenge of capturing the south-coast seat - although not quite immediately.

"'There is a great deal of hard work ahead. But first I am going to the pub,' he tweeted immediately after news emerged of his official selection over two other Labour members."

O'Farrell won't win in Eastleigh - where the two coalition parties are slugging it out for the top spot - and, thankfully, nor will Ukip's Diane James, who is reported to have said yesterday that all immigration into the UK should be halted in order to prevent Romanians from coming to the country and committing crimes here. Who says Ukip are a bunch of bigots, eh?

7) CLEGG THE CREDIT TAKER

Whatever happens to the Lib Dems in Eastleigh, for now, their leader continues be mauled by the papers - from the Telegraph front page:

Nick Clegg has been ridiculed after he appeared to claim credit for his part in securing a cut in the European Union budget.

Mr Clegg, the Deputy Prime Minister, last year claimed that Conservatives who wanted a budget cut had 'absolutely no hope'.

"At his weekly Deputy Prime Minister’s Questions session in the Commons yesterday, however, Mr Clegg claimed that he had spent 'months making the case for the tough approach' adopted by David Cameron in Brussels last week.
Tory backbenchers have described Mr Clegg’s comments as 'ludicrous and implausible'.

8) CASH-FOR-ACADEMIES

Ever wondered why so many schools are so keen to become academies? The Independent this morning splashes on news that

"Officials from Michael Gove's department are offering £65,000 'bribes' to convince reluctant headteachers to convert their schools to academies.

"The sweeteners are being offered to schools which drop their opposition to academy status – sparking claims that taxpayers' money is being spent on "buying off" critics of the Education Secretary's pet project."

Follow, as they say, the money...

9) 'GET OFF OUR PLANES'

To those of you who think Islamophobia is a myth, meet New Zealand MP Richard Prosser - from the Huffington Post:

"A New Zealand politician who sparked condemnation for suggesting Muslim men should be banned on Western airlines will not stand down.

"Writing in his column in Investigate Magazine, First Leader Richard Prosser said: 'If you are a young male, aged between say about 19 and about 35, and you're a Muslim, or you look like a Muslim, or you come from a Muslim country, then you are not welcome to travel on any of the West's airlines.'

"Labelling Islam a 'stone age religion', and claiming most terrorists are 'angry young Muslim men who hate the West', Prosser added: 'I will not stand by while my daughters' rights and freedoms, and those of other New Zealanders and Westerners, are denigrated by a sorry pack of misogynist troglodytes from 'Wogistan'.'"

Charming.

10) 'POLITICALLY CORRECT CENSORSHIP'

From the Telegraph:

"The BBC has been criticised as 'Stalinist' and 'politically correct' for allegedly trying to play down Harold Wilson’s pipe smoking in a five hour television special tomorrow night.

"However, Lord Donoughue, a former right hand man to Mr Wilson in Number 10, claimed that producers had been told to downplay Mr Wilson’s pipe smoking.

"Describing it as 'Stalinist', he said: 'Is the licence payers money being paid for these people. It is censorship – politically correct censorship. How many people do they have monitoring politically correct behaviour?'"

Donoughue adds: “He didn’t smoke it much in private. It was not always lit because he had to put it away in his pocket.

“If he was being interviewed or questioned, the moment he was asked a difficult question he would take out his lighter and light the pipe to give him time to think of an answer.”

QUOTE UNQUOTE

"The position is this. One of the most powerful, talented, intelligent and trusted women in the country wishes you to think that when she took some points for her husband in 2003 she had no real choice in doing so. It is the prosecution's function, if they can, to disprove that before she can be convicted." - Andrew Edis QC, who is prosecuting the Vicky Pryce case at Southwark Crown Court, giving his closing speech yesterday.

PUBLIC OPINION WATCH

From the Sun/YouGov poll:

Labour 43
Conservatives 32
Lib Dems 10
Ukip 9

That would give Labour a majority of 116.

140 CHARACTERS OR LESS

@LizMair: .@CNBC asks what Republicans want to hear in #SOTU. My guess: "I'm resigning and handing this job off to a stealthily preserved Reagan."

@EJDionne Poor Marco Rubio: It was the gulp that roared. TV can be a cruel medium #sotu

@ShippersUnbound Don't understand the fuss over food. I love Haggis and I definitely don't want to know what goes into that...

900 WORDS OR MORE

Seumas Milne, writing in the Guardian, says: "Michael Gove is not just a bungler, he's a destructive ideologue."

Mary Riddell, writing in the Telegraph, says: "Ed Miliband can draw a line under the Labour Party’s war by opposing plans for secret courts."

Martin Wolf, writing in the FT, makes the "case for helicopter money".


Got something you want to share? Please send any stories/tips/quotes/pix/plugs/gossip to Mehdi Hasan (mehdi.hasan@huffingtonpost.com) or Ned Simons (ned.simons@huffingtonpost.com). You can also follow us on Twitter: @mehdirhasan, @nedsimons and @huffpostukpol

Besieged, Abused, Ignored: Ethiopian Annihilation Of The Ogaden People

ethiopia

In the harsh Ogaden region of Ethiopia, impoverished ethnic Somali people are being murdered and tortured, raped, persecuted and displaced by government paramilitary forces. Illegal actions carried out with the knowledge and tacit support of donor countries, seemingly content to turn a blind eye to war crimes and crimes against humanity being committed by their brutal, repressive ally in the region; and a deaf ear to the pain and suffering of the Ogaden Somali people.

Around five million traditionally nomadic pastoralists – live in what is one of the least developed corners of the world besieged by military oppression, drought and famine.

Democracy denied

When the British, with due colonial duplicity, arrogantly handed the Ogaden region over to Ethiopia in 1954, the ethnic Somali people found themselves under occupation by, what they regard as a foreign power. The centuries old struggle for self-determination, has since 1984 been taken up by the Ogaden National Liberation Front (ONLF), predictably regarded as ‘terrorists’ by the Ethiopian government; which hunts them down and, with impunity, tortures, imprisons and rapes its members and suspected supporters while carrying out widespread extrajudicial killings.

In 1992 as part of the Ethiopian Peoples Revolutionary Democratic Front’s (EPRDF) much trumpeted, never realized policy of Ethnic Federalism, that promised autonomy and cultural respect to the many tribal groups in the country; ethnic Somalis in the Ogaden were officially acknowledged and inaugural regional elections held. The ONLF, a secular group in a largely Muslim region, “won 60% of seats… and formed the new (regional) government” Human Rights Watch (HRW) reported. Two years later, and in response to the will of the people, the ONLF called for a referendum on self-determination. The government’s reaction to such democratic gall was to kill 81 unarmed civilians in the town of Wardheer, disband the regional parliament, arrest and imprison the vice-president and several other members of the parliament, instigate mass arrests and indiscriminate killings; this brutal act ignited the current struggle and drove the ONLF into the shadows and its current guerilla war.

Resource rich

The region, rich in oil and gas reserves, is potentially the wealthiest area of Ethiopia. Resources that the indigenous people are understandably keen to benefit from, that the EPRDF sees as another party asset to add to its burgeoning portfolio. Genocide Watch (GW) tell us that, “immediately after oil and gas were discovered in the Ogaden, Ethiopian government forces evicted large numbers of [Ogaden Somalis] from their ancestral grazing lands and herded them into Internally Displaced Persons (IDP) camps, causing a humanitarian disaster”. If the ONLF are correct and their view sounds more than plausible, the Ethiopian military intends to secure the resources for the government and exclude the local people. The Africa Faith and Justice Network confirms such suspicions, saying: “With the discovery of petroleum leading to exploration missions by foreign companies, the government’s motives are questionable.”

Upfront fees for exploration rights are reputed to have been sold to foreign corporations for between $50 – $100 million, paid by under-informed, overexcited multinationals, who subsequently pull out, having underestimated the logistical problems of working in the region. China Petroleum was one such; they were subjected to an unprecedented ill-judged attack by the ONLF in 2007 that caused the deaths of nine Chinese workmen and, according to China Daily , “65 Ethiopian employees”. The Ethiopian government, itching to intensify the conflict that had been simmering for over three decades, retaliated with excessive brutality, by HRW reports, “launching a brutal counter-insurgency campaign in the five zones of [the] Somali Region primarily affected by the conflict… [Where] the Ethiopian National Defense Forces (ENDF) has deliberately and repeatedly attacked civilian populations,” killing hundreds of men women and children.

Displaced & destitute

Thousands of terrified Ogaden Somalis have since fled the affected areas. They seek refuge “in neighbouring Somalia and Kenya from widespread Ethiopian military attacks on civilians and villages that amount to war crimes and crimes against humanity,“(ibid). Large numbers have been made homeless and destitute, accurate numbers are difficult to collate due to restricted access, however human rights groups estimate the number, to be greater than one hundred thousand.

The Ogaden, GW states “has been transformed into a vast military occupied area, with thousands in internally displaced persons (IDP) camps.” Most displaced persons, the International Displacement Monitoring Centre (IDMC) reports, “sought shelter with relatives or safety in the bush, rather than gathering in organized camps,” where widespread abuse is known to take place, including starvation that GW describes as “genocide by attrition”. These desperate, frightened people are not regarded as refugees and so receive no humanitarian aid support from the United Nations High Commission for Refugees (UNHCR). And the EPRDF, consistent with their duplicitous approach to governance, fails to meet dutiful obligations under the historic Kampala Convention which “reaffirms that national authorities have the primary responsibility to provide assistance to IDPs…. (And) … to address the plight of people uprooted within their borders”. The ruling party ignores these requirements, acting not in accordance with international law, the federal constitution or indeed their moral duty.

Especially violent

In 2009, after widespread condemnation of the Ethiopian army’s conduct in the region, the regime formed the highly suspect Liyu (Special) Police. Somaliland Press (26/9/12) states, the government “deliberately recruited unemployed youths from the streets”. This shadowy paramilitary force of 10,000 – 14,000, fits, HRW says, “into the context of impunity where security forces can more or less do what they want.” Not a group, then, that the British government should be supporting. In a baffling move however, according to The Guardian (10/1/13) , the Department for International Development (DFID) has submitted, a “tender to train security forces in the Somali region of Ogaden”, Amnesty International’s Claire Beston said: “It was highly concerning that the UK was planning to engage with the Special Police..…. There is no doubt that the Special Police have become a significant source of fear in the region.”(Ibid) The DFID in denying the report ambiguously states that, “reforming the Special Police is critical for achieving a safe and secure Somali Region”, failing to recognize that the Liyu force needs not reforming but disbanding and, along with all Ethiopian military personnel, marched out of the region immediately.

State-sanctioned terrorism and genocide

In addition to murder and rape, appalling levels of torture and extrajudicial execution are reported. Thousands, according to GW, “have been arrested without any charges and held in desolate desert prisons”. Mass detention “without any judicial oversight are routine. Hundreds—and possibly thousands—of individuals have been arrested and held in military barracks, sometimes multiple times, where they have been tortured, raped, and assaulted”, HRW report.

Children and women being the most vulnerable suffer acutely, the rape of Ogaden Somali women is a favored weapon of the Ethiopian paramilitary; held in military barracks women are imprisoned as sex slaves, where they are subjected to multiple gang rape and torture. African Rights Monitor (ARM) recount one woman’s story that mirrors many and shocks us all. She claims to have been, “raped by fifty soldiers for a period of twelve hours and hung upside down over a pit of fire that had chili powder in…. to suffocate her lungs”.

Statistics of abuse are impossible to state, the numbers are perhaps of less importance than the crimes and the suffering caused, survivors bear the physical scars and mental trauma of their ordeals, from which many may never recover.

A scorched-earth policy involving burning of crops and homes and killing cattle is part of the campaign of state terror, as HRW record, “Confiscation of livestock [the main asset], restrictions on access to water, food, and other essential commodities” have “been used as weapons in an economic war”. As has the destruction of villages, confirmed by evidence from the American Association for the Advancement of Science, proving, “that the Ethiopian military has attacked civilians and burned towns and villages in eight locations across the remote Ogaden region of eastern Ethiopia.” Such inhumane methods are employed by the EPRDF to instill fear in the Ogaden Somali people and suppress their legitimate demands for autonomy. It is shocking criminal abuse which staggeringly, “GW considers to have already reached stage 7 [of 8], genocidal massacres against many [Ogadeni, Anuk, Oromo and Omo] of its people”. International donors however, who provide a third of Ethiopia’s total federal budget – around $4 billion a year, to their utter shame say and do nothing; neglect constituting complicity.

Village executions

With the region virtually shut off, video evidence smuggled out of Ethiopia by Abdullahi Hussein, a former Ethiopian civil servant is rare. Revealing Somaliland Press (26/9/12) say that, “whole villages have been emptied of inhabitants through executions and mass flight from terror… you can hear members of the Liyu Police desecrate a civilian they have just killed. They stomp on his head and poke his face with a stick.” Such attacks on settlements are routine: Demanding our attention is Qurille village in the Wardeer district attacked in September 2012: Ogaden Online recounts how troops: “Shoot each resident of the town in their custody at point blank range” including women and children. Bodies are hung from trees in a public display of state terrorism, to engender lasting fear. This type of brutality is widespread. HRW records how in Raqda village in the Gashaamo district during March 2012, “the Liyu police force summarily executed at least 10 men – in their custody, killed at least nine residents… [and] abducted at least 24 men.”

The killing continued two days later on 17th March, when “Liyu police took another four men from their homes and summarily executed them. A woman whose brother was a veterinarian told HRW: “They caught my brother and took him outside. They shot him in the head and then slit his throat.” Defenseless villages are easy prey for the Liyu and their brutal methodology, as HRW state, “troops have forcibly displaced entire rural communities, ordering villagers to leave their homes within a few days or witness their houses being burnt down and possessions destroyed—and risk death”. Page upon page could be filled with such violent disturbing accounts.

Exclusion of foreign media and aid workers

Contrary to constitutional and human rights law, the EPRDF has imposed a widespread blockade on the Ogaden region, seeking to control the flow of information outside the country as it does within its borders, where it allows no freedom of the media; of expression, of assembly or of political dissent. Add to this the outlawing of trade unions and the partisan distribution of aid and a picture of a brutal totalitarian regime emerges from the duplicitous mist of politically correct, democratic rhetoric.

Attempts to work in the region by international media and humanitarian groups are seen as criminal acts, punishable under the widely condemned anti-terrorist proclamation.
Two Swedish journalists investigating human rights abuses in the Ogaden, made headlines in July 2011 when they were attacked and arrested by the Liyu police and subjected to a terrifying ‘mock’ execution. Charged and sentenced in Ethiopia’s kangaroo court to 11 years imprisonment, they were later released having served 400 days in appalling conditions. Reporters from the New York Times, The Telegraph and Voice of America have also been imprisoned and expelled, so too United Nations (UN) workers and staff from Medecins Sans Frontieres (MSF) who were arrested and accused of being spies! Wrapped in paranoia, the EPRDF suspended 42 NGOs in 2009 for reporting government human rights abuses in the region and, in 2007 in what must be the EPRDF’s Pièce de résistance, the International Committee of the Red Cross were expelled.

In addition to the information embargo, the region is subject to what HRW describe as “severe restrictions on movement and commercial trade, minimal access to independent relief assistance,” and the “politicized manipulation of humanitarian operations, particularly food distribution”; meaning food supplied by donor countries is stolen to feed the Ethiopian army and the Liyu force. This in one of the worst areas for drought and famine in the country, where, In-Depth Africa reports, “1,539,279 people (30% of the population) in the region lack food, water and health services”.

Peace and justice for the people

The little known conflict in the Ogaden is a cause of intense tension between Ethiopia and Somalia and a destabilizing issue in an unstable region. It is a fight that has been distorted by the former Government of Somalia, which sought to misrepresent the issue and transform it into a boundary dispute; a misconception that suits the Ethiopian regime keen to avoid the substantive point of regional autonomy.

All efforts to facilitate a lasting peaceful resolution to what is an age-old struggle should be urgently made, Ethiopia’s donors and facilitators, principally America, along with the European Union and Britain must act with due responsibility. Action should be taken to: Close down IDP camps and the people allowed to return to their communities; aid provided for rebuilding villages (not to train the Liyu) destroyed by the military; regional elections organised and a referendum on self-determination held.

The appalling atrocities committed daily by the Ethiopian paramilitary constitute war crimes and crimes against humanity that should immediately be referred to the International Criminal Court for prosecution. They are, though, just the deepest wounds within a scarred body of human rights abuses, violating federal and international law, being perpetrated by the EPRDF regime throughout the country and with utter impunity. This must end and the Ogaden Somali people, allowed to determine their own destiny and to live in peace.

Graham Peebles is an artist, writer and director of The Create Trust, which he founded in 2006. He has run education projects & teacher training programs in Palestine, India and Ethiopia, where he spent two years working with local groups in Addis Ababa. Contact: graham@thecreatetrust.org

Notes

[i] http://www.chinadaily.com.cn/china/2007-04/24/content_858956.htm

[ii] http://www.hrw.org/node/62175/section/4

[iii] http://www.genocidewatch.org/ethiopia.html

[iv] http://www.genocidewatch.org/ethiopia.html

[v] http://www.internal-displacement.org/countries/ethiopia

[vi] http://www.internal-displacement.org/kampala-convention

[vii] http://somalilandpress.com/ethiopia-a-wave-of-atrocities-against-villages-in-ogaden-35429

[viii] http://www.aljazeera.com/indepth/features/2012/09/201291795840290803.html

[ix] http://www.aaas.org/news/releases/2008/0612ethiopia_intro.shtml

[x] http://ogaden.com/hornnews/ogaden/1495-ethiopian-mass-murder-in-miirdanbas-qoriile.html– By Mohamud A. Dubet

[xi] http://www.hrw.org/news/2012/05/28/ethiopia-special-police-execute-10

[xii] http://www.hrw.org/sites/default/files/features/ethiopia/index.html

[xiii] http://indepthafrica.com/in-ethiopia-a-war-on-humanitarian-agencies-and-staff/#.UPBCpVRl8Xw In Ethiopia: A War on Humanitarian Agencies and Staff

Osborne Summit To Avoid ‘Omnishambles II’

Chancellor George Osborne is today holding a Treasury summit at his official country retreat in an attempt to prevent a repeat of last year's Budget "omnishambles". Treasury ministers and officials have gathered together with Conservative Party HQ sta...

Nigel Farage Pledges To Make Eastleigh A Four-Way Fight

Ukip leader Nigel Farage has pledged to make the Eastleigh by-election a four-way marginal fight and said his party's number one issue will be immigration.

Kicking off the party's campaign in Hampshire, the seat vacated by Chris Huhne's resignation earlier this week, Mr Farage said: "We have nothing against people from Bulgaria and Romania, we wish them well, but we do not think it's right this country has a total open door policy."

He said the pressure on housing, education and services from immigration "poses a major problem" especially if people from other countries claim benefits.

Citizens from Romania and Bulgaria will have full movement rights across Europe from 2014. Farage said other parties were ignoring the issue of immigration.

He did admit that the Liberal Democrats have the advantage in the constituency but he added that he was "delighted" that the Tory candidate, Maria Hutchings, is Eurosceptic.

"If we can rally our support like we have in the last three by-elections in Rotherham, in Middlesbrough and in Corby then this seat could become a four-way marginal," he said.


Guido Fawkes

Eastleigh polling: Conservatives on 34%, the Lib Dems on 31% and Labour on 19%. The UKIP is fourth with 13%.

Mr Farage also called the EU budget reduction negotiated by Prime Minister David Cameron as "a rotten deal for Britain".

"If you go and knock on 100 doors here in Eastleigh and tell them that they will Pay £50 million a day to Europe for the next seven years they will think that's not a good deal."

He also said that "the years of mockery and derision" for the party were over since he had been Ukip's first ever candidate in another Eastleigh by-election in 1994 - coming second to last and just in front of the Monster Raving Loony Party.

"The whole tenor of the debate in this country has changed since then, it's now an in/out debate on Europe," he said.

He explained that in Eastleigh the party would also be campaigning on how a EU subsidy that Britain had put money into had allowed Ford to close its Transit van factory nearby.

But Mr Farage added he would not be standing in the by-election and denied it was because of Mr Cameron's EU referendum promise.

"Good God no," the MEP said. "I do not think a vague promise of a referendum five years from now is a reason for not standing.

"The reason is simple: I am leading this party into the local elections in England and then the European elections and thirdly, it's quite busy in Brussels and I need to be there."


Matt Chorley

UKIP supporters on Twitter seem very bullish about winning Eastleigh. Shame their leader didn't share their confidence

Mr Farage said that the party now had good candidates and denied it was just a one-man party and that he was that man.
"If we went into Eastleigh and asked people to name four front bench Labour politicians they couldn't," he claimed.

He said the party now had a shortlist of five candidates that the local branch would choose tomorrow with the candidate unveiled in Eastleigh on Tuesday morning.

Labour have also started campaigning in the constituency with Southampton Itchen MP John Denham campaigning in the town with activists but the party has not yet picked a candidate.

The Liberal Democrats, who held the seat in the 2010 General Election with a majority of 3,684, will announce their candidate for the February 28 poll on Saturday night.

The US Should Grow the Deficit, Not Shrink It

There is an astounding level of confusion surrounding the current US deficit. There are three irrefutable facts about the deficits:

First, the United States has large deficits because the collapse of the housing bubble sank the economy.President Obama speaks at a White House press conference. Photograph: Rex Features

Second, if we had smaller deficits the main result would slower growth and higher unemployment.

Third, large projected long-term deficits are the result of a broken health care system, not reckless government "entitlement" programs.

The first point can be easily shown by examining the Congressional Budget Office's projections from January 2008 (pdf), before it recognized the impact of the collapse of the housing bubble on the economy. The deficit in 2007 was just 1.2 percent of GDP. The deficit was projected to stay near 1.5 percent of GDP until well into the current decade, even if the Bush tax cuts did not expire.

With deficits of this magnitude, the debt-to-GDP ratio was actually shrinking. In fact, the deficit exploded.

It wasn't because of a surge in reckless spending and/or a splurge of tax cuts, it exploded because tax collections plummeted when the economy went into a downturn. In addition, we increased spending on programs like unemployment insurance. We also had temporary stimulus measures that were explicitly intended to raise the deficit in order to boost the economy.

All of these changes were temporary. If the economy returned to its pre-recession level of unemployment tomorrow, deficits would again be quite manageable, even with no further budget cuts or tax increases.

This feeds directly into the second point: deficits are supporting the economy at present. Any steps that we take to reduce the deficit, either by cutting spending or raising taxes, would pull money out of the economy. This means slower growth and higher unemployment.

There is no plausible story that private sector demand will expand to fill the gap. In more normal times, lower deficits might mean lower interest rates, which could lead to more investment and consumption. However with interest rates already at extraordinarily low levels it is not plausible that deficit reduction would have a noticeable impact.

This means that deficit reduction is throwing people out of work. This will ruin the lives of millions of workers. It can also be a disaster for their families. One of the surest ways of hurting the life prospects for today's children is to put their parents out of work.

Finally, the long-term deficit horror stories that fill Washington parlor discussions are entirely the result of a health care system that now costs more than twice as much per person as the average for other wealthy countries. The ratio is projected to rise to three and four to one in the decades ahead.

Serious people talk about fixing the health care system, a process that may have already begun with Obamacare. Health care costs have increased far less than projected for the last five years. If this slower growth path continues, we will have no long-term deficit problem.

In short, we need deficits today to fill a huge hole in demand created by the private sector. We can best see this as an opportunity to finance public investments in the future. With a negative real long-term interest rate on federal debt, this is a great time to borrow for those with any business sense. By contrast, austerity is a great recipe for pain today and even more pain tomorrow.

© 2012 The Guardian

Dean Baker

Mehdi’s Morning Memo: ‘Misery And Hardship’

The five things you need to know on Friday 8 February 2013...

1) 'MISERY AND HARDSHIP'

So the real villain of the row over disability and incapacity benefits isn't Atos, it's the Department of Work and Pensions (DWP). That's the verdict of the Public Accounts Committee (nowadays, incidentally,the source of at least one big political story a week).

From the BBC:

"The government is to blame for "misery and hardship" imposed upon claimants being re-assessed for benefits eligibility, the Commons public accounts committee says.

"Chairwoman Margaret Hodge accused the Department for Work and Pensions of being 'unduly complacent' and 'getting far too many decisions wrong'.

She said the medical assessments were hitting 'vulnerable claimants hardest'.

"... Although private firm Atos Healthcare has faced criticism for its role in the assessments process, 'most of the problems lie firmly within the Department for Work and Pensions', she said."

The government's response to this damning PAC report? Well, DWP minister Mark Hoban accused the committee of "scaremongering". The problem, of course, for Hoban and his pals is that the PAC report shows that 40% of appeals against Atos' decisions were successful, even though, as the BBC report notes, "no new evidence had been presented in one-third of these cases".

Over to you, Mark...

NOTE: Apologies for the much shorter memo this morning - five things you need to know, rather than ten - because I am still shattered after last night's Huffington Post UK debate, 'Was It Worth It? Iraq, Ten Years On', featuring, among others, Clare Short, Bernard Jenkin MP, David Aaronovitch and, er, me. It was a packed house at Goldsmiths, with more than 500 people in attendance, and if you want to know who won, what was said, etc, check out the HuffPost report and live blog on the event.

2) EU BUDGET

His backbenchers may hate him over gay marriage, but, these days, they love him over Europe - and they may love him even more today if David Cameron returns from Brussels with... wait for it... an historic EU budget cut. From the Guardian:

"European leaders were inching towards a deal in the early hours of Friday morning that would see the first cut in the EU's budget in its 56-year history.

"David Cameron, who had demanded a freeze in real terms in the near-€1tn budget, was planning to claim victory after the European council president proposed a €34.4bn cut over the next seven years.

"Herman Van Rompuy finally tabled his budget proposals in Brussels at 6am after a night of haggling at the EU summit that was described by one official as like a 'bazaar'."

But the BBC's Nick Robinson is reporting on the Today programme that while the overall budget may be cut in real-terms, the British contribution may actually go up - as a result of changes to our rebate agreed by David Cameron's predecessor-but-one, Tony Blair.

The devil, as is so often the case on all matters related to the EU, may be in the detail.

But Eurosceptics won't care for now - the Mail Online has splashed on: "Victory For David Cameron..."

After a tough start to the week, Downing Street will be very pleased this morning.

3) 'HUHNE FORCED ME TO ABORT MY BABY'

The newspapers are all over the Vicky Pryce trial this morning; the ex-wife of disgraced ex-energy secretary Chris Huhne is on the front of the Indy, the Guardian, the Times, the Mirror, the Telegraph and the Daily Mail - from the Mail's splash:

"Vicky Pryce broke down as she told yesterday how Chris Huhne forced her to have an abortion for the sake of his career.

"The high-flying economist, 60, told a jury that her fiercely ambitious husband warned her that a baby would be 'bad timing' for his political future.

"Pryce, who went on to have another child, wept as she said she had 'regretted it ever since'. Her revelation came as she launched an attack on the shamed former Cabinet minister during her trial for perverting the course of justice."

Pryce has pleaded not guilty to perverting the course of justice by taking Huhne's penalty points after a speeding offence in 2003 and, as the Guardian notes, "her defence is one of marital coercion".

Meanwhile the paper also reports on how the Lib Dems "look to have a tough job on their hands to retain Chris Huhne's seat in the Eastleigh byelection after a starting-pistol poll put them three points down on the Conservatives, largely due to the defection of some of their supporters to Labour.

"The survey, conducted on 4-5 February by the former Conservative deputy chairman, Lord Michael Ashcroft... shows the Conservatives on 34%, the Lib Dems on 31% and Labour on 19%. The UK Independence party (Ukip) is fourth with 13%. The figures reveal a 16-point fall in the Lib Dem vote since the 2010 general election, and nine-point rises for Labour and Ukip."

BECAUSE YOU'VE READ THIS FAR...

Watch this video of a gopher performing in a ballet dress. Yep, this is what the internet was invented for...

4) 'FACEBOOK HITLIST'

It's not looking good for the Arab Spring, with Tunisia plunged into political crisis - and violence. The Times reports:

"A leading secular politician accused Muslim extremists yesterday of trying to establish a religious dictatorship in Tunisia after the assassination of a prominent critic of the country's main Islamist party.

"Ahmed Nejib Chebbi, of the centrist Republican Party, said that he had been under police protection for months during rising tension between Islamists and secular parties."

"... The Kapitalis news site posted a hitlist of prominent secular politicians and journalists that it said had been circulating on Islamist Facebook pages. The list, last updated on Monday, featured Chokri Belaid, a politician and human rights lawyer who was shot dead outside his home in Tunis two days later. He had recently warned of growing violence by Islamist enforcers close to the ruling Ennahda party.

"Mr Belaid's murder has pushed Tunisia farther into danger, two years after the start of the Arab Spring. The political deadlock gripping the country has tightened and the ruling party has blocked an attempt by Hamadi Jebali, its Prime Minister, to form a unity government."

5) DOWN WITH DRONES?

Finally, America is having a debate (of sorts!) about the Obama administration's drone war - from the FT:

"John Brennan, the Obama administration's nominee to head the Central Intelligence Agency, gave a vigorous defence of the policy of killing suspected terrorists with drone strikes but suggested yesterday that the agency might conduct fewer such operations.

"Mr Brennan insisted that the US government had 'rigorous standards' for considering targeted killings and that its military operations against al-Qaeda were welcomed in many of the countries in which they have taken place.

"Mr Brennan, who was a career CIA official for more than two decades, said the agency needed to be able to conduct covert operations but he hinted that it might scale back its use of drone strikes. Some of the CIA's activities since the September 11 attacks had been 'a bit of an aberration', he said, adding that the agency "should not be doing traditional military activities and operations".

If you want to read evidence of why Brennan is wrong about "rigorous standards" and drones supposedly "saving lives", check out my drone-myth-debunking blog post from last October: 5 Things They Don't Tell You About Drone Strikes.

PUBLIC OPINION WATCH

From the Sun/YouGov poll:

Labour 41
Conservatives 33
Lib Dems 11
Ukip 9

That would give Labour a majority of 92.

140 CHARACTERS OR LESS

@TomHarrisMP I know he's a liar, a hypocrite and a LibDem to boot, and he deserves everything he gets, but I feel sorry for Chris Huhne. #bbctw

@jameschappers Cameron is going to have a lethal new line against Miliband: even the *EU* has agreed to big spending cuts #eubudget

@benedictbrogan See @marycreagh_mp is making running against Defra by saying she wouldn't eat Findus horsemeat lasagne. Will Owen Paterson tuck into one?

900 WORDS OR MORE

Fraser Nelson, writing in the Telegraph, says: "Michael Gove may have lost a skirmish over the EBacc, but he’s winning the war."

Philip Collins, writing in the Times, says: "It’s not heresy to demand that hospitals treat people like customers. More listening would have meant fewer deaths."

Polly Toynbee, writing in the Guardian, says: "Mid Staffs will be used to justify further reforms – and of the very kind that contributed to that horror in the first place."


Got something you want to share? Please send any stories/tips/quotes/pix/plugs/gossip to Mehdi Hasan (mehdi.hasan@huffingtonpost.com) or Ned Simons (ned.simons@huffingtonpost.com). You can also follow us on Twitter: @mehdirhasan, @nedsimons and @huffpostukpol

Defence cuts ‘close to the bone’

The armed forces cannot afford any further spending cuts if Britain is to maintain its ability to project military power around the globe, a former defence minister has warned.

Sir Nick Harvey, who lost his job as armed forces minister in last year's reshuffle, said the forces risked being reduced to little more than a home guard if the defence budget was squeezed any further.

In an interview with Parliament's The House magazine, Sir Nick, a Liberal Democrat, said the Royal Navy already had too few warships to carry out all the tasks allotted to it. He also questioned whether the Treasury really would come up with the £20 billion needed to replace the Trident submarine fleet which carries Britain's nuclear deterrent.

His intervention comes after Downing Street was forced to admit last week that the Ministry of Defence would not be immune from further cuts in the 2015-16 spending review.

"You can cut and cut and cut and cut until there's nothing left, but you will cease to have coherence and you will cease to have the ability to deploy a worthwhile number in a conflict situation if you take it much further. We're pretty close to the bone anyway. I don't think we can take it any further," he said.

"If we all we wanted to do was to defend our shores you could move to a sort of home guard, but if we want to continue our international efforts to defend out global interests, and the UK does have global economic reach, there is a critical mass below which you cannot dip and still make a worthwhile contribution - and we're not far from it.

"We lost things we could not afford to lose already. The Royal Navy has got too few vessels in service, too little manpower, to execute the tasks already being asked of it."

Sir Nick said morale in the forces was already suffering in the face of the cuts implemented over the last two years - and it had was not helped that the latest round of redundancies in the Army came the day after the announcement that up to 350 personnel were being deployed to Africa in relation to operations in Mali.

"It's a pretty cruel bloody irony that the very next day his ministers are back in the Commons justifying the third tranches of the military redundancies. There was nothing new there, but in presentational terms (it was) a bit sub-optimal in term of Downing Street grid management," he said.

"You freeze pay. You cut allowances, you slash numbers. You work those who are left all the harder to make up for those who have gone. You throw in, for good measure, doubt about where people are going to be based, doubt about what their future pensions are going to look like," he said. "By the time you have compounded all those things together its just inevitable that morale is going to be suffering."

$4bn hole revealed in Russia’s defense spending

Mistral-class amphibious assault ship (RIA Novosti / Alexey Danichev)

Mistral-class amphibious assault ship (RIA Novosti / Alexey Danichev)

Russia's Audit Chamber has revealed the misuse of funding to the tune of 117.5 billion rubles (US$3.9 billion) in national defense spending last year.

That includes “unauthorized use” of 10.6 million rubles and the inefficient spending of over 23 billion rubles ($765 million), Viktor Zavarzin from the lower house’s Committee on Defense told journalists. Some 114 million ($3.7 million) was refunded from the federal budget, he added.

On Thursday, the committee met behind closed doors to hear the Audit Chamber’s report on the results of their inspection into the use of money allocated to provide Russia’s defense.

Experts found violations in the fulfillment of the state armament program and defense procurement. That is largely because executors of state contracts fail to comply with their obligations, the Duma committee said in a statement after the meeting.

The quality of hardware supplied for the country’s defense needs has also been criticized. In particular, because of poor quality of equipment, three satellite launches (one in 2009 and two in 2011) were unsuccessful.

The report comes amid a major corruption scandal in the Russian military which resulted in the replacement of Defense Minister Anatoly Serdyukov.

Last year, investigators launched over a dozen of criminal cases into alleged embezzlement of budget funds and abuse of office by high-ranking military officials.

On Thursday, the Investigative Committee announced it will question the ministry’s officials in relation to yet another episode if the chain scandals – an alleged sale of real estate at artificially low prices in the resort city of Anapa on the Black Sea.

According to investigators, back in July 2010, the city transferred a large piece of land together with buildings to the Defense Ministry at the request of Serdyukov.

The territory was meant for the construction of a navigation station. The land then went through a complicated chain of transfers and privatized. Later, the property was sold for 110 million rubles, much lower than its commercial value of 167 million rubles ($5.5 million).

Currently, elite housing is being built on the land under order of Valery Puzikov, husband of Serdyukov’s sister, the Investigative Committee’s spokesman Vladimir Markin said, cites RIA Novosti.

Frontrunning: February 7

  • Bersani's lead over Berlusconi continues to erode, now just 3.6 Pts, or inside error margin, in Tecne Poll
  • Spain gears up for U.S. debt investor meetings (Reuters)
  • PBOC Set for Record Weekly Liquidity Injection (WSJ)
  • RBS Trader Helped UBS’s Hayes With Libor Bribes, Regulators Say (BBG)
  • ECB, Ireland reach bank debt deal (Reuters)
  • AMR-US Airways Near Merger Agreement (WSJ)
  • Monte Paschi says no more derivatives losses (Reuters) ... remember this
  • Harvard’s Gopinath Helps France Beat Euro Straitjacket (BBG) - by sliding into recession?
  • Obama Relents on Secret Drone Memo (WSJ)
  • Brennan to face questions on interrogations, drones and leaks (Reuters)
  • Wall Street Success With Germans Boomerangs (BBG)
  • Khamenei rebuffs U.S. offer of direct talks (Reuters)
  • Boeing Preps Redesign to Get 787 Flying  (WSJ)
  • Jim Rogers Joins Bill Gross Warning on Treasuries (BBG)
  • Alcatel Chief Is Out as Turnaround Stalls (WSJ)

Overnight Media Digest

WSJ

* U.S. President Barack Obama agreed to let a small group of lawmakers look at a classified opinion explaining his administration's legal justification for targeting killings of American terror suspects in other countries.

* American Airlines parent AMR Corp and US Airways Group Inc are hashing out the last major details of a merger agreement that would create the world's largest airline and are racing to finalize a deal, said people close to the discussions.

* Standard & Poor's Ratings Services could face a much higher legal bill than the $5 billion sought by the federal government as more and more states join the battle against the credit-ratings firm.

* Royal Bank of Scotland agreed to pay more than $610 million in fines to settle interest-rate-rigging charges with U.S. and UK authorities, and the bank's Japanese unit will plead guilty to U.S. fraud charges.

* Boeing Co is proposing a series of battery design changes that it believes would minimize the risks of fire on its 787 Dreamliners and allow the grounded jets to fly again while it continues searching for a longer-term fix, say government and industry officials briefed on the matter.

* Monte dei Paschi di Siena, the Italian bank at the center of a burgeoning financial scandal, was so strapped for cash in late 2011 that it negotiated a covert loan of nearly 2 billion euros ($2.71 billion) from the Bank of Italy even as executives were describing the lender's funding position as comfortable, according to the Bank of Italy and people familiar with the deal.

* Google Inc said it will require current advertisers using its AdWords online-ad system to pay for ads on some mobile devices, like tablets, for the first time.

* News Corp's earnings more than doubled in the three months to December, helped by one-time gains related to acquisitions, but the media and entertainment company cut its profit outlook.

FT

A day before the Bank of England's monetary policy committee announces the outcome of its monthly meeting, Chancellor George Osborne has called on BoE for a looser monetary policy to boost economic recovery.

Buyout firms are racing to raise funds for a possible 10 billion pounds bid for EE - the United Kingdom's largest mobile-phone operator. A group formed by Apax and KKR and another led by Blackstone and CVC Capital Partners are working on competing bids.

A News Corp executive said the company would hold on to its 39.1 percent stake in BSkyB for now. Chief Operating Officer Chase Carey said the media conglomerate was still looking at the long-term case for either selling its stake or trying again to take full control to BSkyB, after scrapping plans in wake of the phone hacking scandal in the UK.

Cantor Fitzgerald was in advanced talks, that stretched into Wednesday night, to buy British brokerage firm Seymour Pierce.

Institutional Shareholder Services, ISS, the influential adviser on corporate governance matters, has recommended that Bumi's shareholders vote against Nat Rothschild's proposals to replace all the miner's independent directors.

Royal Bank of Scotland will pay $612 million to U.S. and British authorities to settle allegations it manipulated benchmark interest rates. Five traders at Deutsche Bank's Frankfurt-based money market desk have been suspended as part of an internal inquiry by the bank to find out whether its staff manipulated the Euro Interbank Offered Rate, Euribor.

Dell's $24.4 billion deal to go private was almost derailed by a debate over whether the company would continue paying its quarterly dividend over the next few months, according to several people involved in the transaction.

Property tycoon Vincent Tchenguiz is seeking 200 million pounds in damages from UK's Serious Fraud Office over the agency's mishandling of investigations linking him to the collapse of Iceland's banking system

NYT

* Emails and employee interviews filed as part of a lawsuit show that JPMorgan Chase & Co flouted quality controls as it bundled mortgages into complex financial instruments.

* The Royal Bank of Scotland on Wednesday reached a combined $612 million settlement with American and British authorities over accusations that it manipulated interest rates, the latest case to emerge from a broad international investigation.

* U.S. federal regulators approved one flight of a Boeing 787, with a crew but no passengers, as engineers study ways to reduce the risks of another battery fire.

* Revenue from advertisements and subscription fees from Time Warner Inc's cable properties helped overcome a challenging quarter for the media conglomerate's publishing and movie divisions.

* Monte dei Paschi di Siena, an ancient Tuscan bank whose troubles have shaken Italian politics and caused jitters around the euro zone, on Wednesday confirmed earlier estimates of losses from a series of secret transactions that were used to conceal the scope of the bank's problems.

* GlaxoSmithKline Plc plans to cut costs in its struggling European drugs division and promised investors a return to growth this year, after failing to deliver a hoped-for recovery in sales and profits in 2012.

* Cravath, Swaine & Moore has hired David Kappos, the departing director of the United States Patent and Trademark Office, the second time the law firm has added a former senior Obama administration official to its partnership

Canada

THE GLOBE AND MAIL

* Stephen Harper's Conservative Party is fighting changes to federal ridings in Saskatchewan after an independent commission recommended new boundaries that should make it easier for Tom Mulcair's New Democratic Party to regain a foothold there.

* Ottawa's finances are taking a hit from discounted prices for Canadian oil, and Finance Minister Jim Flaherty says this will force him to hold a harder line on spending as he prepares the 2013 budget.

Reports in the business section:

* Canadian consumers are victims of higher prices driven by less competition than in the United States, the Senate says, as it formally urged the federal government to close that price gap by reducing tariffs and other barriers at the border.

* With demand among air travelers showing no signs of waning, WestJet Airlines Ltd posted strong fourth-quarter and year-end profits, beating most industry watchers' expectations.

NATIONAL POST

* Ontario Finance Minister Dwight Duncan will be resigning his seat in the legislature next week.

A government source tells The Canadian Press that Duncan will make it official when he holds a news conference Thursday at Queen's Park.

* Attawapiskat Chief Theresa Spence has called a band council meeting for Thursday to discuss a blockade on a winter road leading to a De Beers diamond mine.

De Beers Canada says a group of residents of the remote northern Ontario reserve set up the blockade on Monday on a road the company uses to move in supplies like fuel, machine parts and equipment that would be too heavy to fly in.

FINANCIAL POST

* Consumers are asking for clear language in their cellphone contracts and want to be able to put a cap on extra fees, says a draft of a national wireless code.

Thousands of Canadians contributed their ideas to the first draft of the national wireless code, which was released Monday by the Canadian Radio-television and Telecommunications Commission.

China

CHINA SECURITIES JOURNAL

-- Some Chinese provinces and cities, including Zhejiang on the coast near Shanghai, could raise natural gas prices in the third quarter, sources said.

-- Top-tier cities could cut the amount of housing pre-sale certificates and reduce approvals for new houses in the first half of the year, sources said.

SHANGHAI SECURITIES NEWS

-- The ministry of finance said China would allocate 120 billion yuan ($19.26 billion) to support domestic traffic infrastructure construction.

CHINA DAILY (www.chinadaily.com.cn)

-- Inflation is fine at present and potential money supply risks can be effectively contained, said a central bank official who declined to be identified.

-- Yunnan province has suspended the approval of "laojiao" punishment, or re-education through labour, a system established in the 1950s that Chinese lawmakers expect to abolish this year.

PEOPLE'S DAILY

-- Chinese Premier Wen Jiabao said at an executive meeting of the State Council that Chinese oil refining enterprises should speed up the upgrading of equipment and strengthen oil product quality supervision.

Fly On The Wall 7:00 Am Market Snapshot

ANALYST RESEARCH

Upgrades

BlackBerry (BBRY) upgraded to Outperform from Market Perform at Wells Fargo
Con-way (CNW) upgraded to Buy from Neutral at Citigroup
DeVry (DV) upgraded to Neutral from Underweight at JPMorgan
Fortune Brands (FBHS) upgraded to Buy from Hold at KeyBanc
Goodrich Petroleum (GDP) upgraded to Outperform from Sector Perform at RBC Capital
Molycorp (MCP) upgraded to Neutral from Underweight at JPMorgan
Owens Corning (OC) upgraded to Buy from Neutral at Longbow
Reliance Steel (RS) upgraded to Buy from Hold at Dahlman Rose
ViaSat (VSAT) upgraded to Buy from Hold at Needham
Vipshop (VIPS) upgraded to Buy from Hold at Deutsche Bank
Yandex (YNDX) upgraded to Overweight from Neutral at HSBC

Downgrades

Aaron's (AAN) downgraded to Hold from Buy at Canaccord
Akamai (AKAM) downgraded to Hold from Buy at Jefferies
Akamai (AKAM) downgraded to Neutral from Buy at Janney Capital
Apollo Investment (AINV) downgraded to Market Perform from Outperform at Wells Fargo
Elan (ELN) downgraded to Sector Perform from Outperform at RBC Capital
Endo Health (ENDP) downgraded to Underperform from Sector Perform at RBC Capital
Ignite Restaurant (IRG) downgraded to Neutral from Outperform at RW Baird
PACCAR (PCAR) downgraded to Neutral from Buy at UBS
Peregrine (PSMI) downgraded to Perform from Outperform at Oppenheimer
Rexnord (RXN) downgraded to Market Perform from Outperform at BMO Capital
Stryker (SYK) downgraded to Neutral from Outperform at Credit Suisse
TriQuint (TQNT) downgraded to Neutral from Buy at Longbow
United Microelectronics (UMC) downgraded to Neutral from Overweight at HSBC
Virgin Media (VMED) downgraded to Hold from Buy at Deutsche Bank
Visa (V) downgraded to Market Perform from Outperform at Wells Fargo

Initiations

Delta Apparel (DLA) initiated with a Buy at Roth Capital
Fly Leasing (FLY) initiated with a Buy at Deutsche Bank
Google (GOOG) initiated with a Neutral at Sterne Agee
Optimer (OPTR) initiated with an Outperform at RW Baird
Trulia (TRLA) initiated with a Neutral at Goldman
ValueClick (VCLK) initiated with a Buy at Goldman
Vertex (VRTX) initiated with an Outperform at RW Baird

HOT STOCKS

Dell (DELL): Silver Lake's equity contribution to deal is $1.4B
Yahoo! (YHOO) to run Google's (GOOG) AdSense, AdMob services on some sites
Landry's Restaurant (LNY) offered to acquire ARK Restaurants (ARKR) for $22.00 per share
BGI-Shenzhen extended tender offer for Complete Genomics (GNOM) to February 22 from February 6
O'Reilly Automotive (ORLY) sees 190 new store openings in FY13
Sees FY13 free cash flow $450M-$500M, gross profit margin 49.9%-50.3%
Spectrum Brands (SPB) sees improvements in financial results 2H weighted
Visa (V) authorized new $1.75B share repurchase program
Allstate (ALL) raised repurchase program by $1B to $2B
AT&T (T), Communications Workers of America reached tentative agreement
Green Mountain (GMCR) expects to build brewer inventory in 2H13
Vornado (VNO) received $124M in settlement of Stop & Shop (AHONY) litigation
Fujitsu (FJTSY) to cut approximately 5,000 employees

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
Starwood Hotels (HOT), Cigna (CI), Prestige Brands (PBH), Towers Watson (TW), O'Reilly Automotive (ORLY),Visa (V), News Corp. (NWSA), Spectrum Brands (SPB), Green Mountain (GMCR)

Companies that missed consensus earnings expectations include:
Rand Logistics (RLOG), Albany International (AIN), Tesoro (TSO), Prudential (PRU), Yelp (YELP), Con-way (CNW), Plains All American (PAA)

Companies that matched consensus earnings expectations include:
FMC Corporation (FMC), Atmel (ATML)

NEWSPAPERS/WEBSITES

  • The $24.4B deal to take Dell (DELL) private shows what is possible in the leveraged-buyout market but doesn't necessarily portend a return of the mega deals popular before the financial crisis. The deal has components that are unusual and will make its size difficult to replicate, bankers, private-equity executives and analysts said, the Wall Street Journal reports
  • Standard & Poor's Ratings Services (MHP) could face a bigger bill than the $5B sought by the federal government as more states join the battle against the credit-ratings firm, the Wall Street Journal reports
  • Chrysler Group (FIATY) agreed to make Banco Santander's (SAN) U.S. arm its preferred lender for auto loans to broaden the financing it can offer its buyers and dealers, Reuters reports
  • Boeing (BA) said contract talks with India for military helicopters will be unaffected by planned budget cuts, after the country's defense minister said spending on arms would be tightened, Reuters reports
  • Sovereign wealth funds which pushed their real estate deal making to a record last year, are set to extend their buying spree as they seek alternatives to low-yielding bonds and volatile stocks. The funds made 38 property investments valued at almost $10B in 2012, Bloomberg reports
  • Japan’s major banks (MTU, MFG, SMFG) are following Goldman Sachs (GS) into domestic solar-power projects, anticipating an eightfold increase for investments in the industry. The banks expect the market to be worth as much as $19B over the next three years, Bloomberg reports

SYNDICATE

BreitBurn Energy (BBEP) files to sell 13M shares of common stock
Disney (DIS) registers 37.07M shares of common stock for Lucas Trust
ExOne (XONE) 5.3M share IPO priced at $18.00
Hudson Pacific (HPP) files to sell 7.5M shares of common stock
Nexstar (NXST) announces secondary offering of 3M shares by selling stockholders

Your rating: None

USPS Seeks to Cut Saturday Mail Delivery

USPS Seeks to Cut Saturday Mail Delivery

Email this item Email    Print this item Print    Share this item... Share
Posted on Feb 6, 2013
quinn.anya (CC BY-SA 2.0)

Struggling under the weight of mandatory future retiree benefit payments, the U.S. Postal Service said it would move to a five-day schedule in August to save $2 billion a year.

It would still drop off packages on Saturdays and mail would be deposited in post office boxes. The agency contends that it has the authority to reduce service, but some in Congress argue that legislators should make the decision.

In November, the agency reported a record annual loss of $15.9 billion for the last budget year and forecast more shortages in 2013. Since 2006, the USPS has cut annual costs by about $15 billion and reduced the size of its career workforce by 28 percent, or 193,000 employees, officials say.

—Posted by Alexander Reed Kelly.

The Guardian:

The agency’s biggest problem was not due to reduced mail flow but rather to mounting mandatory costs for future retiree health benefits, which made up $11.1bn of the losses. Without that and other related labor expenses, the mail agency sustained an operating loss of $2.4bn, lower than the previous year.

The health payments are a requirement imposed by Congress in 2006 that the post office set aside $55b in an account to cover future medical costs for retirees. The idea was to put $5.5bn a year into the account for 10 years – $5.5bn the post office doesn’t have.

No other government agency is required to make such a payment for future medical benefits. Postal authorities wanted Congress to address the issue last year, but lawmakers finished their session without getting it done. So officials are moving ahead to accelerate their own plan for cost-cutting.

Read more

More Below the Ad


New and Improved Comments

If you have trouble leaving a comment, review this help page. Still having problems? Let us know. If you find yourself moderated, take a moment to review our comment policy.

Please enable JavaScript to view the comments powered by Disqus.

Waves of Anti-Greed Movements in the United States

I was doing some research for the ‘origins’ section of the Occupy Wall Street page on Wikipedia which I have had free rein on for a while now. Doing that research gave me an idea.

The U.S. Congress: From One Crisis to Another, The Politics of Debt Default

washington

“The full consequences of a default — or even the serious prospect of default — by the United States are impossible to predict and awesome to contemplate… Denigration of the full faith and credit of the United States would have substantial effects on the domestic financial markets and on the value of the dollar in exchange markets.”

-Ronald Reagan (1911-2004), 40th President of the United States (1981–89), (1983)

“Decisions about the debt level [should] occur in conjunction with spending and revenue decisions as opposed to the after-the-fact approach now used… [doing so] would help avoid the uncertainty and disruptions that occur during debates on the debt limit today.”

-U.S. Government Accountability Office (G.A.O.)

“I will not have another debate with this Congress over whether they should pay the bills for what they’ve racked up… We can’t not pay bills that we’ve already incurred.”

-President Barack Obama, Tuesday January 1, 2013

That’s why the American people hate Congress.”

-Chris Christie, New Jersey Republican Governor, (January 2, 2013, after the Republican House majority refused to vote on a $60 billion aid package for victims of Superstorm Sandy)

One crisis averted, three to come! Indeed, that’s what can be said after the U.S. House of Representatives passed legislation on January 23, 2013, to suspend the government’s statutory borrowing limit for three months.

In fact, the cycle of artificially created crises will go on and on in Washington D.C. Now, the next crises are scheduled for March 1s, for March 27th and for May 19th. Stay tuned. On March 1st, automatic sequester cuts agreed by Congress in 2012 will take effect, causing an immediate cut of $69 billion in public discretionary spending. Then, on March 27, the U.S. government’s ability to fund itself (the “continuing resolution”) will run out. And, of course, come May 19, the melodrama of raising the debt ceiling will be back again in force.

Ever since Republicans took control of the 435-member U.S. House of Representatives in 2010, a fiscal drama with the White House and the U.S. Senate has been replayed time and again. One of the political gimmick is called the “raising of the country’s debt limit.

Why so many artificial crises in the current American political system? Extreme political polarization seems to be the answer.

Indeed, since the 2010 mid-term election, when the Republican Party took control of the House of Representatives with some 242 seats, this party has behaved as if it were in fact two parties in one. There is the traditional conservative Republican Party on one side, and the radical Republican Tea Party on the other side. With some 67 anarchist anti-tax and anti-establishment Tea Party House members voting as a block, the latter has been in a position to hold the balance of power in the House and to prevent compromised solutions to the country’s fiscal problems.

A good example was the 2011 showdown between the Democratic Obama administration and the Republican-controlled House of Representatives regarding raising the U.S. government’s debt ceiling.

In the spring of 2011, House Republicans, spurred by Tea Party members who practice no party discipline toward the Republican Party except to themselves, and reneging on a decades-long bipartisan tradition, refused to raise the nation’s debt ceiling, thus threatening to push the U.S. government toward debt default. They demanded that the Obama administration concede to freezing tax revenues and to enacting massive spending cuts. In the midst of a financial crisis and an economic slowdown, such huge public spending cuts could have pushed the U.S. economy toward an economic depression similar to the 1930’s Great Depression.

For the first time, therefore, House Tea Party members decided to use the perfunctory requirement to raise the debt limit to gain partisan political advantage. That move has introduced into the functioning of the U.S. Congress an element of radicalism and brinkmanship that could prevent the U.S. government from operating properly for years to come.

Mind you, the obligation for Congress to vote on raising the U.S. government’s debt ceiling has existed since a 1917 law to that effect was enacted. It allows the U.S. Treasury to proceed with borrowing to finance government operations as outlined in an already approved budget for a given fiscal year.

Economically speaking, indeed, there are three main ways to finance public expenditures: -through tax revenues; -through borrowing; -or, through the printing press, when a government borrows from its own central bank. The latter is in fact an inflation tax imposed on every user of the national currency.

Therefore, if the U.S. Congress has already approved a public budget of operations that does not raise taxes in a sufficient amount to cover outlays, and if an inflation tax is out of question, the only other avenue left is to borrow the required funds.

For years, the 1917 requirement to raise the debt limit was considered redundant since the budget had already been approved and it was seen as a simple bipartisan formality. Since 1940, for example, the U.S. debt ceiling has been raised 94 times, 54 times by a Republican administration and 40 times by a Democratic administration. Altogether the debt ceiling has been raised 102 times since 1917. It has been raised every year that the U.S. government has run a deficit.

If the Tea Party members of the House keep on routinely using the 1917 law to formally raise the debt limit as an obstructionist tool, Congress may be constantly gridlocked and the U.S. government will continue going from crisis to crisis. A small minority of House members could then hold the U.S. government hostage. As a consequence, it could become increasingly difficult for the U.S. Administration to implement sensible economic and fiscal policies along the principle of majority rule. The U.S. economy is bound to suffer severely from such a political paralysis.

In 2011, former president Bill Clinton expressed the view that the 1917 law is unconstitutional since it goes against Article I, sec. 8 of the U.S. Constitution that requires that Congress pay “the Debts and provide for the … general Welfare of the United States.” Besides, the Fourteenth Amendment (section 4) of the U.S. Constitution states that: “the validity of the public debt of the United States… shall not be questioned.

Therefore, if Congress does not fulfill its duties for one reason or another, the President in whom executive power is vested may have the right to act for the “general Welfare of the United States”.

In the coming weeks, if the House of Representatives refuses bipartisan cooperation and keeps stonewalling the Administration, President Obama may have no other choice but to call the Tea Party members’ bluff by unilaterally declaring the 1917 law unconstitutional and letting the courts sort it out later.

A constitutional crisis may seem to many to be a better alternative than a repetitive and protracted economic and financial crisis and an economy constantly teetering on the brink of a permanent fiscal cliff.

Dr. Rodrigue Tremblay, a Canadian-born economist, is the author of the book “The Code for Global Ethics, Ten Humanist Principles”, and of “The New American Empire”)

The American Lockdown State

The American Lockdown State

Email this item Email    Print this item Print    Share this item... Share
Posted on Feb 5, 2013
Live4Soccer(L4S) (CC BY-ND 2.0)

By Tom Engelhardt, TomDispatch

This piece first appeared at TomDispatch.

Consider Inauguration Day, more than two weeks gone and already part of our distant past.  In its wake, President Obama was hailed (or reviled) for his “liberal” second inaugural address.  On that day everything from his invocation of women’s rights (“Seneca Falls”), the civil rights movement (“Selma”), and the gay rights movement (“Stonewall”) to his wife’s new bangs and Beyoncé’s lip-syncing was fodder for the media extravaganza.  The president was even praised (or reviled) for what he took pains not to bring up: the budget deficit.  Was anything, in fact, not grist for the media mill, the hordes of talking heads, and the chattering classes?

One subject, at least, got remarkably little attention during the inaugural blitz and, when mentioned, certainly struck few as odd or worth dwelling on.  Yet nothing better caught our changing American world.  Washington, after all, was in a lockdown mode unmatched by any inauguration from another era—not even Lincoln’s second inaugural in the midst of the Civil War, or Franklin Roosevelt’s during World War II, or John F. Kennedy’s at the height of the Cold War.

Here’s how NBC Nightly News described some of the security arrangements as the day approached:

“[T]he airspace above Washington… [will be] a virtual no-fly zone for 30 miles in all directions from the U.S. capital.  Six miles of the Potomac and Anacostia Rivers will be shut down, with 150 blocks of downtown Washington closed to traffic, partly out of concern for car or truck bombs… with counter-snipers on top of buildings around the capital and along the parade route… [and] detectors monitoring the air for toxins… At the ready near the capital, thousands of doses of antidotes in case of a chemical or biological attack… All this security will cost about $120 million dollars for hundreds of federal agents, thousands of local police, and national guardsmen from 25 states.”

Consider just the money.  It’s common knowledge that, until the recent deal over the renewal of the George W. Bush tax cuts for all but the richest of Americans, taxes had not been raised since the read-my-lips-no-new-taxes era of his father.  That’s typical of the way we haven’t yet assimilated the new world we find ourselves in.  After all, shouldn’t that $120 million in taxpayer money spent on “safety” and “security” for a single event in Washington be considered part of an ongoing Osama bin Laden tax?

Maybe it’s time to face the facts: this isn’t your grandfather’s America. Once, prospective Americans landed in a New World.  This time around, a new world’s landed on us.

Making Fantasy Into Reality

Bin Laden, of course, is long dead, but his was the 9/11 spark that, in the hands of George W. Bush and his top officials, helped turn this country into a lockdown state and first set significant portions of the Greater Middle East aflame.  In that sense, bin Laden has been thriving in Washington ever since and no commando raid in Pakistan or elsewhere has a chance of doing him in.

Since the al-Qaeda leader was aware of the relative powerlessness of his organization and its hundreds or, in its heyday, perhaps thousands of active followers, his urge was to defeat the U.S. by provoking its leaders into treasury-draining wars in the Greater Middle East.  In his world, it was thought that such a set of involvements—and the “homeland” security down payments that went with them—could bleed the richest, most powerful nation on the planet dry.  In this, he and his associates, imitators, and wannabes were reasonably canny.  The bin Laden tax, including that $120 million for Inauguration Day, has proved heavy indeed.

In the meantime, he—and 9/11 as it entered the American psyche—helped facilitate the locking down of this society in ways that should unnerve us all.  The resulting United States of Fear has since engaged in two disastrous more-than-trillion dollar wars and a “Global War on Terror” that shows no sign of ending in our lifetime. (See Yemen, Pakistan, and Mali.)  It has also funded the supersized growth of a labyrinthine intelligence bureaucracy; that post-9/11 creation, the Department of Homeland Security; and, of course, the Pentagon and the U.S. military, including the special operations forces, an ever-expanding secret military elite cocooned within it.

1   2   3   4   NEXT PAGE >>>

Get truth delivered to
your inbox every week.

Previous item: On Guns, Unfinished Business



New and Improved Comments

If you have trouble leaving a comment, review this help page. Still having problems? Let us know. If you find yourself moderated, take a moment to review our comment policy.

Please enable JavaScript to view the comments powered by Disqus.

The Nefarious Ways 9-11 Turned America into a Lockdown State

Even after his death, Osama bin Laden thrives in the U.S.'s transformation into a lockdown state.

February 5, 2013  |  

Like this article?

Join our email list:

Stay up to date with the latest headlines via email.

To stay on top of important articles like these, sign up to receive the   latest updates from TomDispatch.com here.

Consider Inauguration Day, more than two weeks gone and already part of our distant past.  In its wake, President Obama was  hailed (or reviled) for his “liberal”  second inaugural address.  On that day everything from his invocation of women’s rights (“Seneca Falls”), the civil rights movement (“Selma”), and the gay rights movement (“Stonewall”) to his wife’s  new bangs and Beyoncé’s lip-syncing was fodder for the media extravaganza.  The president was even  praised (or reviled) for what he took pains not to bring up: the budget deficit.  Was anything, in fact, not grist for the media mill, the hordes of talking heads, and the chattering classes?

One subject, at least, got remarkably little attention during the inaugural blitz and, when mentioned, certainly struck few as odd or worth dwelling on.  Yet nothing better caught our changing American world.  Washington, after all, was in a lockdown mode unmatched by any inauguration from another era -- not even Lincoln’s second inaugural in the midst of the Civil War, or Franklin Roosevelt’s during World War II, or John F. Kennedy’s at the height of the Cold War.

Here’s how NBC Nightly News  described some of the security arrangements as the day approached:

“[T]he airspace above Washington... [will be] a virtual no-fly zone for 30 miles in all directions from the U.S. capital.  Six miles of the Potomac and Anacostia Rivers will be shut down, with 150 blocks of downtown Washington closed to traffic, partly out of concern for car or truck bombs... with counter-snipers on top of buildings around the capital and along the parade route... [and] detectors monitoring the air for toxins... At the ready near the capital, thousands of doses of antidotes in case of a chemical or biological attack… All this security will cost about $120 million dollars for hundreds of federal agents, thousands of local police, and national guardsmen from 25 states.”

Consider just the money.  It’s common knowledge that, until the  recent deal over the renewal of the George W. Bush tax cuts for all but the richest of Americans, taxes had not been raised  since the read-my-lips-no-new-taxes era of his father.  That’s typical of the way we haven’t yet assimilated the new world we find ourselves in.  After all, shouldn’t that $120 million in taxpayer money spent on “safety” and “security” for a single event in Washington be considered part of an ongoing Osama bin Laden tax?

Maybe it's time to face the facts: this isn’t your grandfather’s America. Once, prospective Americans landed in a New World.  This time around, a new world’s landed on us.

Making Fantasy Into Reality

Bin Laden, of course, is  long dead, but his was the 9/11 spark that, in the hands of George W. Bush and his top officials, helped turn this country into a lockdown state and first set significant portions of the Greater Middle East  aflame.  In that sense, bin Laden has been thriving in Washington ever since and no commando raid in Pakistan or elsewhere has a chance of doing him in.

Since the al-Qaeda leader was aware of the relative powerlessness of his organization and its hundreds or, in its heyday, perhaps thousands of active followers, his urge was to defeat the U.S. by  provoking its leaders into treasury-draining wars in the Greater Middle East.  In his world, it  was thought that such a set of involvements -- and the “homeland” security down payments that went with them -- could  bleed the richest, most powerful nation on the planet dry.  In this, he and his associates, imitators, and wannabes were reasonably canny.  The bin Laden tax, including that $120 million for Inauguration Day, has proved heavy indeed.

US Congress to request details of foreign account holders with US banks

Reuters / Jessica Rinaldi

Reuters / Jessica Rinaldi

The US government is reportedly considering requesting details from banks of foreigners holding accounts in America. The news follows US demands for details of foreign nationals’ accounts abroad.

­Labeled ‘part of a crackdown on tax evasion’, the US will potentially have access to the details of millions of foreign customers who hold accounts with America-based branches, according to Reuters. The move is expected to face strong resistance from the banking industry.

Wealthy foreigners and financial institutions that bank in the US could have their account details given to the US government. The Obama administration is expected to make the request of Congress in a forthcoming Whitehouse budget proposal. 

The Foreign Account Tax Compliance Act (FATCA) already requires overseas financial companies to identify their American customers to the Internal Revenue Service. 

In January this year, Switzerland’s oldest bank, Wegelin & Co., was forced to close after the US imposed a $22 million fine on the institution, alongside restitution of $20 million to the IRS, and a $15.8 million fee. The bank was accused of allowing American nationals to hide their earnings after US judge gave the Internal Revenue Service (IRS) permission to obtain data on the bank from Swiss financial institution UBS. On January 5th, a Manhattan federal court ruled the information on Wegelin & Co’s former clients could be demanded by the US.  

It’s highly possible that the new proposal will be part of a move to aid negotiations with foreign financial agencies. Reuters published part of a letter written last October by Mark Mazur, Treasury Assistant Secretary for Tax Policy, saying that the government aimed “to pursue equivalent levels of reciprocal automatic exchange in the future.” America is requesting data from foreign sources even now, and some are resisting its pressure. If successful, it is likely further fines will be imposed. 

Bilateral agreements mean that four countries have already started sharing information on the finances of their US residents – the United Kingdom, Denmark, Ireland and Mexico. The US is negotiating with another 50 countries. 

Many have been unable to meet the US’s requirements as they would come into direct conflict with local privacy laws. 

Some countries, including France, Germany and China have been delaying the sharing of information, as they consider it one-sided and unreasonable that they are expected to share details of the US accounts of French, German and Chinese nationals abroad. However, the US has already progressed in their negotiations with the three. 

Reuters said that although China appears reluctant to comply, the country is in ‘behind the scenes’ discussions. 

FATCA requires financial institutions (non-US banks and investment funds) to inform the IRS about accounts held by those from the US with balances of more than $50,000. They face economic restrictions should they fail to provide data. FATCA was set into motion in 2010, and will come into play towards the end of 2013.

The IRS held an ‘offshore amnesty’ in October 2011, which offered the opportunity for people with money in offshore bank accounts to come forward, before the IRS found them through data sharing.  

Switzerland is following the UK and signed a FATCA deal with the US in December 2012, which is due to come into play in January 2014. Switzerland attracts many rich foreigners and has already been subject to US action.  

“The United States is committed to a policy of transparency and equivalence, where appropriate, in furtherance of international cooperat